On Tuesday, TechnologyOne Ltd (ASX: TNE) shares had a strong session.
The enterprise software provider's shares stormed to an all-time high of $15.86 after investors responded positively to its half-year results release.
What happened during the half?
For the six months ended 31 March, TechnologyOne reported a 22% increase in revenue to $210.3 million, a 40% jump in software-as-a-service (SaaS) annual recurring revenue (ARR) to $316.3 million, and a 24% lift in profit before tax to $52.7 million.
Pleasingly, management expects more of the same in the second half and is guiding to full-year SaaS ARR growth of 40% and profit before tax growth of 10% to 15%.
Management also revealed that it believes it is on track to achieve its total ARR target of $500 million+ by FY 2026.
Is it too late to buy TechnologyOne shares?
Brokers have been running the rule over the result and have given it the thumbs up.
However, with TechnologyOne shares hitting a record-high, the broker community appears to believe that they are now close to peaking.
As a result, there are an overwhelming number of hold or neutral ratings and no buy ratings in sight.
For example, this morning Bell Potter downgraded the company's shares to a hold rating from buy with an improved price target of $17.50.
It notes that "Technology One reported a strong 1HFY23 result with both revenue and PBT ahead of our forecasts ($210.3m and $52.7m vs BPe $196.6m and $49.9m)." However, due to its current valuation not offering sufficient upside for a buy rating, it has downgraded its recommendation to hold.
It is a similar story at Goldman Sachs, with its analysts holding firm with their neutral rating but boosting their price target to $16.25. The broker explains:
The company's mission critical ERP systems and defensive public sector end markets provide a valuable amount of earnings visibility in coming years. That said, we believe TNE, trading at ~45x NTM P/E (~2.7x PEG), is reasonably valued compared to large cap AU TMT peers and with +3% upside to our revised TP we stay Neutral.
