No. of Recommendations: 1
By IPO Candy, seekingalpha.com:


Summary

Pivotal Software came public last week at $15 and traded quietly on their debut.

Their very rapid growth in high-margin SaaS is being masked by their shift away from providing professional services.

This provides a rare opportunity to buy one of the key names in enterprise cloud infrastructure at a good price.

Our IV suggests the shares can reach $34 in the next year.

Pivotal Software (PVTL) went public on Friday at $15/share. The offering didn't get a resounding vote from the markets. Unlike other recent enterprise software deals, this one ended quietly at $15.75.

We think PVTL is likely to do well at these levels. Partly because investors focused on "slowing growth" in revenues. That misses the most valuable aspect of the growth story - services revenues are actually declining YoY while software subscription revenue growth remains robust.

The table below illustrates the underlying dynamics. Note not only the growth in SaaS revenue but also the overall increase in gross margin. With 90% margins on the SaaS business, this is the one we want to grow.


cont'd

https://seekingalpha.com/article/4165162-pivotal-software-co...

Starrob
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