RBC Capital analyst Matthew Hedberg this morning raised his ratings on both BMC Software (BMC) and CA Technologies (CA) to Outperform, from Sector Perform. For BMC, his target goes to $50, from $44. BMC yesterday closed at $42.32. For CA, is new target is $30, up from $22. CA closed yesterday at $21.39.
His basic thesis is that “the enterprise systems management space is in the early innings of a secular up-tick.”
“The ability to manage complex data centers will be paramount, in our opinion, to continued growth in an IT organization,” he writes in a research note. “As virtualization has garnered the lion’s share of discussion in reducing CapEx spend, we believe the OpEx side of the equation is often ignored. Many data centers are hitting a wall such that the cost of managing incremental VMs [virtual machines] more than outweighs the CapEx savings. Specifically, it is our assumption that for every $1 spent on virtualization software alone, the management software opportunity is $3-$4 of incremental spend. As such, we believe the enterprise systems management (ESM) space is in the early innings of a secular up-tick as IT organizations struggle with increasingly complex data centers that include physical servers, virtualized servers, private cloud environments and public cloud applications.”
He adds that this is not a call on the September quarter, “but rather a secular upgrade thesis coupled with an attractive valuation and favorable risk/reward trade-off.”
In today’s trading:
- BMC is up 67 cents, or 1.6%, to $42.99.
- CA is is up 43 cents, or 2%, to $21.82.