3 Potential Catalysts For Ellie Mae

Analysts at RBC Capital Markets turned bullish on Ellie Mae Inc ELLI ahead of three potential catalysts that will present themselves in the near-term. The firm's Ross MacMillan upgraded Ellie Mae's stock to Outperform with a price target boosted from $90 to $105.

A Sector Perform rating that was put in place back in November 2016 was based on the assumption that refinance volumes would decline "materially," which in turn would impact revenue growth, MacMillan explained in the note.

3 Catalysts

First, while it took longer than expected there are once again some "signs of optimism," including improvement in the mortgage origination composite forecast over the past two months, large banks are similarly reporting a similar improvement, and a stabilization of refi loans closing in a 90-day period after seeing material declines throughout the first half of 2017.

Second, revenue growth for Ellie Mae is expected to grow 17 percent year-over-year in calendar 2018, which marks an acceleration from a 12 percent growth expected for the full year 2017, the analyst said. Although this does mark a decrease from a prior 25 percent growth rate assumption, a 12 percent figure may be conservative.

Third, Ellie Mae's launch of the next generation Encompass platform will likely give the company the ability to expand its share of loans, increase network adoption and add new solutions, MacMillan highlighted. This will ultimately drive higher revenue for the company through higher revenue per loan, network revenue and more loans on the overall platform.

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