Apptio Stock on the Verge of a Major Breakout

Apptio StockApptio Delivering Strong Results

Over the past several years, the stock market has welcomed numerous cloud-based application software companies, due to the massive demand for third-party productivity software. An intriguing initial public offering (IPO) that has been surging in recent months is Apptio Inc (NASDAQ:APTI), with a current valuation of around $17.00 and a market cap of $677.4 million.

The company provides a data and analytics platform offered via the cloud to IT managers to improve the efficiency of their technology assets. The client base comprises of around 325 companies worldwide in areas such as technology, financial services, healthcare, aerospace, and energy. Approximately 40% of Fortune 100 companies use the platform.

APTI stock is down about eight percent year-to-date, but is up an impressive 51% over the past three months. The chart is indicating a potential breakout to the high of $24.60 on the initial day of trading.

The Bullish Fundamental Picture for APTI Stock

Apptio has delivered impressive revenue growth to date and has great expectations going forward over the next two reportable years.

The compound annual growth rate for revenues was 29.5% from 2013 to 2016 with revenues increasing from $73.77 million to $160.57 million.

The positive revenue trend for APTI stock is predicted to continue at 12.8% to $181.12 million in 2017 and 15.60% to $209.40 million in 2018. (Source: “Apptio, Inc. (APTI),” Yahoo! Finance, last accessed July 7, 2017.)

But while Apptio has yet to turn a profit, the company has been expanding its key gross margin metric to 66% in 2016 compared to the recent average of 62%–63%.

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A look at the bottom line shows a move toward achieving profitability as early as 2018 if Apptio can continue to grow revenues while controlling the cost side.

Wall Street appears to have taken notice of APTI stock. There were three higher earnings per share (EPS) revisions for 2017 during the past 30 days, and four higher revisions for 2018. Generally, higher EPS will translate into a higher price for Apptio stock.

The Technical Pictures Looks Enticing

The high point for Apptio stock was on its initial trade date. APTI stock subsequently retrenched to its post-IPO low of $10.77 on April 7, prior to the current 59% rally.

Apptio stock appears to be languishing before its next move, because the relative strength index (RSI) and the moving average convergence/divergence (MACD) needs to strengthen.

apti stock chart

Chart courtesy of StockCharts.com

If the APTI stock price can hold and then begin another rally, we could witness the upcoming formation of a bullish cup and handle pattern, with a target at the $20.00 resistance level.

Assuming we see another rally in the technology sector, Apptio stock could take a run at its $24.60 high and break toward the $30.00 level, representing a potential gain of 76%.