3 Reasons Why Goldman Sachs Turned Bullish On Ansys

Shares of engineering simulation software company ANSYS, Inc. ANSS are likely to outperform, according to Goldman Sachs. 

The Analyst

Analyst Gabriela Borges upgraded Ansys from Neutral to Buy and increased the price target to $207.

The Thesis

Ansys is the most insulated from long-term competitive threats from large technology computing platforms such as Microsoft Corporation MSFT, Amazon.com, Inc. AMZN and Alphabet Inc GOOGL GOOG, Borges said, citing conversations with customers, channel partners and consultants.

Borges attributed her forecast for continued outperformance to three factors: 

• Company-specific efforts to improve positioning and productivity.
• A positive secular outlook supported by new price points that aid increased penetration, the tie-up with PTC Inc PTC and the long-term opportunity presented by safety-critical machine learning applications.
• The potential for margin improvement after troughing in 2018. 

Ansys has enacted a sales force realignment for targeted improvement in key market segments, an increased technical salesforce and hiked channel investments, the analyst said. 

Goldman Sachs is 3 percent above the Street in its EPS estimate for fiscal 2018 and 6 percent above consensus for fiscal 2019 EPS.

Although the stock appears expensive, Borges said its premium to peers on a next-12-month free cash flow basis is in-line with historical averages. The multiples will hold if estimates are upwardly revised, she said. 

The Price Action

Ansys shares were up more than 3 percent at $182.10 at the time of publication Wednesday.

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