WANdisco still a 'buy' for UBS but target price halved

UBS reiterated its 'buy' recommendation on 'big data' software company WANdisco but slashed its target price by more than half to 330p, though this still offered a 69% upside on Thursday's closing price.

Sheffield-based WANdisco reported second-quarter bookings of $2.4m, down 29% year-on-year, including $1.0m of Big Data bookings awarded by eight different new customers, the most ever in a quarter, with all new customers having "intentions to scale up their subscriptions over time."

While management kept costs below the first quarter, bookings of Application Lifecycle Management (ALM) fell 59% to $1.4m as the division suffered from changes in the sales team, which was disappointing but UBS hopes for an improvement in the second half.

The Swiss bank said while the early traction of WAND's new Fusion Big Data solution was encouraging, customers were
scaling-up more gradually than it had modelled.

"In part at least we attribute this to the changes in the go-to-market partnerships announced in March and Fusion's recent launch."

For ALM, UBS has trimmed its model to $18m of bookings in the full year and $36.7m for 2016, down from $69.4m previously, but also cut its cost forecast to $38.1m in 2015 from $43.9m, and $37.0m in 2016 from $51.8m.

A lower $2.3m cash position is now expected at year end and $9.5m debt position at the end of 2016, while it was noted that WAND has a $10m credit facility with HSBC.

The new price target, which was derived from a sum-of-the-parts valuation, of 330p was cut from 775p as a 15-year adoption curve for Big Data solutions was assumed rather than the former 10 years.