Pegasystems (PEGA) AI Stock Analysis

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Pegasystems

(NASDAQ:PEGA)

Rating:80Outperform

Price Target:

$112.00

▲(10.53%Upside)

Pegasystems' robust financial performance and strategic advancements, particularly the transition to profitability and debt-free status, are the most significant contributors to its strong stock score. The positive earnings call, highlighting growth in key areas and strategic success, further enhances confidence in the company's future prospects. Technical indicators and valuation metrics suggest moderate risk, with high growth expectations already priced in.

Positive Factors

Financial Performance

Free cash flow continues to improve; TTM unadjusted FCF is up 11% Y/Y and a now debt-free balance sheet unlocks what we anticipate will be significant repurchases under a $500M authorization.

Innovation

The announcement of the Pega Agent Experience, incorporating AI agents, demonstrates innovation and potential for future growth.

Market Expansion

Management highlighted that its target market now includes over 10,000 companies, up from its prior target of 1,000 companies.

Product Expansion

The company announced new products and provided updates on its opportunity with Blueprint, which are helping to expand the company’s addressable market.

Negative Factors

Growth Concerns

Pega Cloud ACV growth slowed down and missed consensus expectations, impacting overall sentiment.

Macroeconomic Uncertainty

Recent headwinds from DOGE and tariffs have created some uncertainty in the market.

Pegasystems (PEGA) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$8.77B

Dividend Yield0.12%

Average Volume (3M)1.10M

Price to Earnings (P/E)49.8

Beta (1Y)1.29

Revenue Growth14.29%

EPS Growth151.38%

CountryUS

Employees5,443

SectorTechnology

Sector Strength82

IndustrySoftware - Application

Share Statistics

EPS (TTM)1.53

Shares Outstanding85,582,250

10 Day Avg. Volume827,374

30 Day Avg. Volume1,095,155

Financial Highlights & Ratios

PEG Ratio-0.02

Price to Book (P/B)21.44

Price to Sales (P/S)0.00

P/FCF Ratio-215.12

Enterprise Value/Market Cap1.26

Enterprise Value/Revenue1.81

Enterprise Value/Gross Profit8.89

Enterprise Value/Ebitda13.13

Forecast

1Y Price Target

$114.30

Price Target Upside12.80% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering12

Pegasystems Business Overview & Revenue Model

Company DescriptionPegasystems Inc. (PEGA) is a leading global software company that specializes in developing customer relationship management (CRM) and business process management (BPM) solutions. Headquartered in Cambridge, Massachusetts, Pegasystems provides cutting-edge software applications to help organizations optimize their customer engagement and automate complex business processes. The company's core products include the Pega Platform, Pega Customer Service, Pega Sales Automation, and Pega Marketing, which are designed to enhance operational efficiency and improve customer experiences across various industries.

How the Company Makes MoneyPegasystems generates revenue primarily through the sale of software licenses, cloud-based services, and maintenance and support services. The company employs a subscription-based model for its software offerings, providing clients with both on-premise and cloud deployment options. Revenue streams include software license fees, which are typically recognized upfront, and recurring subscription fees for its cloud services. Additionally, Pegasystems offers professional services, such as consulting and training, to assist clients in implementing and optimizing their software solutions. Key partnerships with technology and consulting firms, such as Accenture and Capgemini, help expand its market reach and contribute to its earnings by facilitating more extensive deployment of its solutions among large enterprises.

Pegasystems Key Performance Indicators (KPIs)

Any

Revenue by Segment

Revenue by Segment
Analyzes revenue from different business units or product lines, highlighting which areas are driving growth and which may need strategic adjustments.

Chart InsightsPegasystems' Cloud segment shows strong growth momentum, with recent earnings highlighting a 23% rise in Pega Cloud ACV, driven by effective cross-selling and upselling. The Subscription License segment remains volatile, reflecting macroeconomic uncertainties and currency impacts noted in the earnings call. Meanwhile, the company's strategic focus on Pega GenAI Blueprint is expected to drive further digital transformation, despite challenges in the Consulting and Maintenance segments. Achieving a debt-free status and robust free cash flow underscores financial resilience, positioning Pegasystems well for future growth.

Data provided by:

Main Street Data

Pegasystems Earnings Call Summary

Earnings Call Date:Apr 22, 2025

(Q1-2025)

% Change Since: 47.37%|

Next Earnings Date:Jul 23, 2025

Earnings Call Sentiment Positive

The earnings call highlighted a strong start to the fiscal year with significant growth in key metrics such as ACV and free cash flow. The success of Pega GenAI Blueprint and achieving a debt-free status were notable achievements. However, currency impacts and macro-economic uncertainties were areas of concern. Overall, the positive aspects and optimism for future growth outweigh the challenges, indicating a robust performance.

Q1-2025 Updates

Positive Updates

Strong Start in 2025

Annual Contract Value (ACV) increased by $74 million, marking a 13% year-over-year growth. Pega Cloud ACV grew by 23% to $700 million, showing strong cross-selling and upselling efforts.

Record Free Cash Flow

Achieved $202 million in free cash flow in Q1, significantly surpassing the total free cash flow of $201 million for the entire year of 2023.

Pega GenAI Blueprint Success

Pega GenAI Blueprint is now influencing every single piece of business, accelerating client engagement and showcasing Pega's platform capabilities effectively.

Debt-Free Status Achieved

Fully repaid remaining convertible note balances of $468 million, achieving debt-free status as an important milestone in the company's transformation journey.

Positive Reception to Innovations

Overwhelmingly positive response to innovations like Pega GenAI Blueprint, with more than 1,000 new Blueprints created every week, more than double from months ago.

Negative Updates

Currency Impact on Pega Cloud Revenue

Currency fluctuations impacted Pega Cloud revenue, creating noise in the revenue line items of the P&L.

Macro-Economic Uncertainty

Higher levels of uncertainty and anxiety in the macro-environment, especially in European countries.

Company Guidance

In the first quarter of fiscal year 2025, Pegasystems reported robust financial performance and strategic progress, with notable highlights including a substantial increase in annual contract value (ACV) by $74 million, reflecting a year-over-year growth of over 13%. The company also achieved a Pega Cloud ACV growth rate of 23%, reaching $700 million, demonstrating effective cross-selling and upselling strategies. Pegasystems generated $202 million in free cash flow, a significant leap from the previous year's figures, and repurchased approximately 1.5 million shares for $120 million, further strengthening its capital allocation strategy. Additionally, the company achieved a debt-free status after fully repaying $468 million in convertible notes, marking an important milestone in its transformation journey. Despite the macroeconomic uncertainties, Pegasystems remained confident in its strategic initiatives, particularly emphasizing the transformative role of Pega GenAI Blueprint in driving digital and legacy transformations for clients worldwide.

Pegasystems Financial Statement Overview

Summary

Pegasystems has shown significant improvements in profitability, revenue growth, and operational efficiency. It transitioned from losses to profitability with strong cash flow generation and a solid balance sheet, although asset shrinkage and cash flow volatility warrant monitoring.

Income Statement

Very Positive

Pegasystems demonstrates strong revenue growth with a 9.74% increase from the previous year and a healthy gross profit margin of 75.73% in TTM. The net profit margin has significantly improved to 11.98% from previous losses, indicating enhanced profitability. EBIT and EBITDA margins of 16.55% and 19.34% respectively, show strong operational efficiency.

Balance Sheet

Positive

The balance sheet shows a stable financial position with a debt-to-equity ratio of 0.11, indicating low leverage. The equity ratio is 46.23%, reflecting a strong equity base. Return on Equity (ROE) has improved to 32.17%, showcasing effective utilization of shareholders' equity. However, the decrease in total assets over the years may pose a potential risk.

Cash Flow

Positive

Operating cash flow to net income ratio is robust at 1.88, indicating strong cash generation relative to net income. Free cash flow has seen substantial growth, and the free cash flow to net income ratio is 1.85, highlighting efficient cash usage. However, fluctuations in investing and financing cash flows suggest potential volatility.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
1.64B	1.50B	1.43B	1.32B	1.21B	1.02B
	Gross Profit
1.24B	1.11B	1.05B	949.21M	875.29M	706.60M
	EBIT
271.92M	123.88M	80.95M	-87.66M	-94.73M	-143.53M
	EBITDA
321.22M	167.06M	121.06M	-119.28M	-94.73M	-67.94M
	Net Income Common Stockholders
196.74M	99.19M	67.81M	-345.58M	-63.04M	-61.37M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
68.36M	739.97M	423.34M	297.22M	362.78M	465.17M
	Total Assets
984.81M	1.77B	1.51B	1.36B	1.59B	1.60B
	Total Debt
52.61M	549.67M	581.27M	687.74M	678.54M	518.20M
	Net Debt
-15.75M	212.56M	351.37M	542.68M	518.58M	346.30M
	Total Liabilities
445.80M	1.18B	1.16B	1.23B	1.18B	1.06B
	Stockholders Equity
539.01M	585.48M	353.84M	130.84M	416.09M	542.17M
Cash Flow		Free Cash Flow
361.02M	338.21M	201.00M	-13.04M	28.66M	-25.93M
	Operating Cash Flow
370.01M	345.93M	217.78M	22.34M	39.12M	-563.00K
	Investing Cash Flow
191.72M	-202.58M	-50.75M	13.07M	72.50M	-321.68M
	Financing Cash Flow
-624.10M	-30.21M	-81.96M	-46.99M	-121.84M	423.45M

Pegasystems Technical Analysis

Technical Analysis Sentiment

Positive

Last Price101.33

Price Trends

50DMA

87.20

Positive

100DMA

87.44

Positive

200DMA

84.62

Positive

Market Momentum

MACD

3.40

Positive

RSI

64.36

Neutral

STOCH

83.57

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PEGA, the sentiment is Positive. The current price of 101.33 is above the 20-day moving average (MA) of 99.18, above the 50-day MA of 87.20, and above the 200-day MA of 84.62, indicating a bullish trend. The MACD of 3.40 indicates Positive momentum. The RSI at 64.36 is Neutral, neither overbought nor oversold. The STOCH value of 83.57 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for PEGA.

Pegasystems Risk Analysis

Pegasystems disclosed 34 risk factors in its most recent earnings report. Pegasystems reported the most risks in the "Finance & Corporate" category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Pegasystems Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CWAN	81 Outperform	$6.77B	14.54	58.14%	―	23.21%	―
PEGA	80 Outperform	$8.77B	49.82	39.29%	0.12%	14.29%	151.38%
CVLT	75 Outperform	$8.32B	113.21	25.23%	―	18.63%	-55.09%
QXO	75 Outperform	$10.99B	―	1.44%	―	0.22%	48.10%
BILL	69 Neutral	$4.70B	482.28	0.97%	―	14.52%	―
VERX	65 Neutral	$6.51B	235.54	-19.65%	―	15.20%	-666.94%
Sector *	62 Neutral	$11.90B	10.64	-7.50%	2.90%	7.41%	-8.19%

* Technology Sector Average

Performance Comparison

PEGA

Pegasystems

101.33

43.07

73.93%

CVLT

CommVault Systems

187.16

74.13

65.58%

QXO

QXO Inc

20.16

-152.83

-88.35%

BILL

Bill.com Holdings

45.37

-6.40

-12.36%

VERX

Vertex

38.09

3.68

10.69%

CWAN

Clearwater Analytics Holdings

24.75

4.65

23.13%

Pegasystems Corporate Events

Stock BuybackDividendsBusiness Operations and StrategyFinancial Disclosures

Pegasystems Reports Strong Growth in Pega Cloud ACV

Positive

Jun 2, 2025

On June 2, 2025, Pegasystems Inc. presented its financial update, highlighting significant growth in its Annual Contract Value (ACV) driven by Pega Cloud, which grew from $50 million in 2017 to $700 million in 2025. The company has completed its multi-year subscription transition and achieved the Rule of 40, balancing growth and profitability. Pegasystems is on a strong trajectory toward sustained profitability, supported by its strategic focus on generating free cash flow and capital allocation, including share repurchases and dividend payments. The company’s GenAI Blueprint and large market opportunities are expected to drive further growth.

The most recent analyst rating on (PEGA) stock is a Buy with a $78.00 price target. To see the full list of analyst forecasts on Pegasystems stock, see the PEGA Stock Forecast page.

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.