Goldman Sachs is adding RightNow (NASDAQ:RNOW) to their Americas Investment Sell List and lowering price target to $15 from $17. Firm's call is that its high valuation compared to the software sector in general underestimates the risk, particularly shorter term.
The company is going through a business model transition away from perpetual licenses, the sales force was given modified territories in 1Q, the sales management changed, and the compensation was realigned. They are slightly lowering their top and bottom line estimates for 2Q and full year 2007.
RightNow trades at a substantial premium to the rest of the software sector. The stock is trading at 82X 2007E EV/adjusted FCF multiple compared to the software group median of 19X. 2008E multiples are 57X for RightNow and 17X for the software median.
Notablecalls: More often than not, changes in sales force indicate problems to come. GSCO's on right tracks here. Expect to see some selling pressure.
RNOW 1-yr chart: