96% increase and counting! 3 reasons why TechnologyOne shares continue to rise

TeknolojiOne Ltd (ASX: TNE) shares continued their dominant run in November and are now up over 96% year to date.

The enterprise software provider continues to deliver solid financial results below these price increases.

As a result, a handful of analysts and fund experts are bullish on the company’s outlook. Here are the reasons TechnologyOne shares can continue to climb the ASX Mountain:

TechnologyOne shares on the rise in 2024

One may wonder what is behind the rise shown in the TechnologyOne stock chart this year. We know that stock prices generally follow earnings over the long term. However, TehnologyOne’s recent earnings growth could also support price gains in the short term (this year).

The company reported an 18% increase in pre-tax profits In FY24 figuresbeating market expectations, sending TechnologyOne shares higher.

This was driven by a 20% increase in annual recurring revenue (ARR), which is the competitive advantage of the Software as a Service (SaaS) model that produces predictable and recurring cash flows.

Goldman Sachs stock is on the rise and rates it as a buy with a price target of $32.69. That figure, which exemplifies Goldman’s sentiment, is 47% higher than its previous price target on the business.

UBS also raised its price target to $33.80 and said the stock is a buy after FY24 results. The broker cited revenue growth and the firm’s profit margins as the main reasons for his thesis.

He also predicts TechnologyOne can grow its pre-tax profits by 20% annually over the next five years.

If this means similar growth in earnings and valuation rates remain stable, the stock could appreciate a similar amount. Only time will tell.

On the other hand, Barrenjoey issued a sell recommendation on TechnologyOne shares, setting a price target of $25.20. While there is no reason for the stock to rise further, it is something to consider.

Funds such as customer base

TechnologyOne operates in more defensive sectors of the economy, such as education and government.

These industries are less sensitive to economic fluctuations and provide the company with a steady stream of income even during market volatility.

TechnologyOne has delivered earnings growth of 10% to 15% annually, according to the Pengana Capital team. more than twenty years Thanks to this resilient customer base.

Accordingly Australian Financial ReviewThe fund manager is a long-term owner of the stock and adheres to the policy of “taking advantage of market mispricing” and “waiting patiently”.

Pengana’s portfolio managers emphasize that the company’s SaaS offering is sticky. Customers rarely switch providers due to the complexity of enterprise software integrations.

This loyalty has helped TechnologyOne maintain long-term contracts and expand its ARR. Management is currently targeting $1 billion in ARR by FY30, which could positively impact TechnologyOne shares

Stupid takeaway

The market appears divided on whether TechnologyOne shares can continue to rise from here. However, there is plenty of support to suggest that this could happen.

Experts believe the stock could trade higher based on a combination of business growth, a solid market position, and earnings uncorrelated with the business cycle.

Time will tell what happens from here.