Nomura Makes A Bull Call On 'Disruptive' MuleSoft

By 2020, it is estimated that more than $2.5 trillion will be spent on the digital transformation, with $500 billion coming from enterprise software, according to Nomura. 

Mulesoft Inc MULE’s Anypoint technology is considered a "disruptive" platform for the industry, as it is providing the core foundation for enterprise businesses' most important digital initiatives, the research firm said in an initiation report. 

The Analyst

Analyst Christopher Eberle initiated coverage on Mulesoft with a Buy rating and $30 price target.

The Thesis

Mulesoft’s Anypoint platform is the company's key catalyst for growth moving forward, as it provides the core foundation for an organization’s most important digital initiatives and accounts for nearly 80 percent of the company's revenue, Eberle said in a note. 

“Just as HTML and browsers opened the internet to the world, MULE, with the help of modern-day APIs, is set to break down the silos of the legacy enterprise environment while enabling its users to create differentiated customer experiences, open new revenue channels and define entirely new business models,” the analyst said. 

The trend toward containers and micro services is a significant tailwind for Mulesoft, as the Anypoint platform serves this need by connecting and managing enterprises’ myriad of small services, Eberle said. 

With enterprises in the very early stages in moving toward agile development, Nomura projects that the total addressable market of $30 billion for Mulesoft could be significantly higher once enterprises start accounting for internal development costs that are not easily accounted for today. 

“With a large potential TAM and product capabiltiies well ahead of the competition, MULE is poised to continue to gain share against the legacy incumbents in the integration software market," Eberle said. 

Price Action

Shares of the company moved slightly lower on Wednesday, at last check trading at $25.01. 

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