This week, Manhattan Associates' share price experienced a significant decline.
Manhattan Associates, represented by the ticker symbol MANH, saw a significant drop in its share prices by around 25% this week, reaching a low point at 4 p.m. ET on Thursday, as reported by S&P Global Market Intelligence. The company, known for providing top-notch software solutions for supply chain, inventory, and omnichannel operations, has been a fantastic 120-bagger since the turn of the century.
However, its latest fourth-quarter earnings report didn't meet expectations, even though Manhattan technically beat the analyst estimates, showing 7% revenue growth and 14% adjusted earnings per share (EPS) growth. This was not enough to satisfy the market, as Manhattan's projection for 2025's revenue growth of only 2.5% and an adjusted EPS decline of 5% left investors disillusioned. As a result, the market revised Manhattan's lofty valuation.
Despite the short-term setbacks in Manhattan's services revenue, the outlook for its longer-term prospects remains promising. Manhattan holds an enviable position in its niche, receiving top marks from Forrester for its order management and point-of-sale systems. By being a leader in both areas, Manhattan enjoys a substantial advantage as retailers move towards an omnichannel presence. Furthermore, its Remaining Performance Obligations (RPO) increased by 25% between the end of 2023, suggesting that the projected growth deceleration in 2025 may not persist beyond that point.
Manhattan's valuation stands at 47 times Free Cash Flow (FCF) and boasts a return on invested capital (ROIC) of an impressive 82% (a potentially market-beating indicator). This makes Manhattan a potentially appealing business, trading at a more reasonable price.
Relevant Insights from Enrichment Data
Manhattan Associates reported strong fourth-quarter and full-year results, with revenue of $255.8 million for Q4 2024. However, Q4 services revenue fell short of expectations, growing by only 0.3% compared to the previous year. For 2025, Manhattan Associates projects total revenue growth of 2% to 3% and a decline in GAAP EPS of 10% to 13%. Despite the recent challenges, analysts remain positive about Manhattan Associates, with an average twelve-month stock price forecast of $273.33.
Analysts suggest a moderate buy rating for MANH shares, signaling a potential upside of 36.48% based on their 12-month stock forecasts. Manhattan Associates remains focused on cloud solutions and customer upgrades, which historically drive its services growth. The company expects a rebound in services revenue growth by mid-2025. Despite current macroeconomic uncertainties, Manhattan Associates remains optimistic about its market opportunity and is executing its business strategy effectively.
In light of the recent earnings report, investors are reconsidering their approach towards investing in Manhattan Associates, given the company's projected 2.5% revenue growth and 5% adjusted EPS decline for 2025. Despite these short-term challenges, many financial analysts continue to recommend investing in Manhattan Associates, viewing its high valuation at 47 times Free Cash Flow (FCF) and impressive return on invested capital (ROIC) of 82% as potential opportunities.
