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Deutsche Bank has some interesting comments on Ariba (ARBA) following better than expected results posted last night.

Ariba reported strong 2Q revenues and EPS of $83m and $0.09 (above DB's and consensus estimates of $82m and $0.08) with subscriptions of $31m (up over 50% y/y organically) and bookings up over 70% organically. Firm believes 2Q could represent a turning point for the stock and see meaningful appreciation in the next six months on execution to guidance alone. Reiterates Buy and $16 price target.

Firm sees execution to management's reiterated guidance of $0.45 in EPS for Sept. improving investor sentiment in the short-term and sees several dynamics helping longer-term growth:

  1. Full-featured SaaS release GA
  2. Sales capacity up 26% y/y and productivity is improving
  3. An improved competitive environment with SAP's delayed SRM initiative and its recently completed Procuri, Inc. acquisition

Firm expects these factors alongside a growing ASN opportunity being showcased at the May 5th Analyst day and User Conference and would recommend building positions before that event.

Notablecalls: I see ARBA just broke the $10 level this AM. More upside may be in the cards.

Source: DB: Ariba Should See Meaningful Appreciation Over Next 6 Months