Upland Software Stock: Setting Up for a Major Breakout

Upland Software Stock
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Upland Software Stock Looking to Higher Ground

The technology sector is sizzling with staggering moves by the brand name tech companies, propelling the NASDAQ to another record on Friday. Now, whether the moves are sustainable is unknown, but there is abundant momentum in play.

I have been looking at the small-cap end of the technology sector, especially in the cloud area. An interesting stock to put on your watch list is Upland Software Inc (NASDAQ:UPLD), which is up a superlative 144% this year, with more to come.

What intrigues me about Upland Software stock is its focus on the workflow applications space via the cloud. The solution helps companies plan and manage all of their workflow processes in a broad range of areas.

Upland Software counts as its clients numerous Fortune 2000 companies worldwide.

If you missed the amazing thrill ride up from the 52-week low of $7.48, don’t worry. That’s because Upland Software is delivering awesome results, and the trend is expected to continue.

My Bull Case for UPLD Stock

Revenues have been on the rise for three consecutive years, to $74.8 million in 2016, resulting in a strong compound annual growth rate of about 22%.

The ratcheting up of Upland Software revenues also drove up gross profits and expanded gross margins to around 62%.

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Even more impressive is that the revenue growth rate has increased. Revenues are expected to grow 27.2% to $95.14 million this year, which is well above the 12.6% estimate for April.

For 2018, revenue growth moderates to 11.6%, but this compares favorably to the previous 4.8% estimate for Upland Software. (Source: “Upland Software, Inc. (UPLD),” Yahoo! Finance, last accessed November 3, 2017.)

While the revenue metrics are positive, the only thing missing for Upland Software is profits. However, this is expected to change this year.

Upland Software was already generating positive cash flow, so the move to profitability that began in the first quarter is encouraging.

The company is predicted to earn $0.94 per diluted share this year, and as much as $1.35 per diluted share in 2018.

Based on the quarterly results, Upland Software appears to be on target for meeting or beating its estimate for this year after recording $0.41 per diluted share in first-half profits, well above the expected $0.06-per-diluted-share loss.

The rising earnings per share trend over the last 90 days is bullish and helps to support my bull case for UPLD stock.

Analyst Take:

UPLD stock trades at an appealing 16.2 times its high estimate for 2018. The price/earnings to growth (PEG) ratio of 1.16, prior to discounting in the free cash, is attractive for a growth stock.

The price chart of this stock displays a bullish multi-year breakout at around $10.00, to above the 50-day moving average.

Upland Software stock chart

Chart courtesy of StockCharts.com

UPLD stock is currently in a tight sideways channel and is looking for a breakout at $22.00 on an ascending triangle. We may see the emergence of a bullish golden cross if the 59-day moving average can break above the 200-day moving average.

Should this happen, Upland Software stock could take on its record of $25.56 traded in July.

The multiple could expand to 25 times, implying a share price of $27.50 for UPLD stock to start, and then a move to above $30.00, based on 22 times its high estimate for 2018.