Vertical Software: Mid-cap winners in mission-critical markets
Technology
Vertical software companies continue to generate superior shareholder returns, supported by durable industry dynamics and deep competitive moats. These firms deliver domain-specific, high-utility solutions that integrate into mission-critical workflows, enabling strong customer retention and product-led growth grounded in sector expertise. Operating in oligopolistic, niche markets with winner-takes-most characteristics, they face limited competitive disruption due to unattractive risk-reward profiles for new entrants. 2Xideas’ in-depth report is structured in 4 parts: a comparison of vertical vs. horizontal software models; a review of the shared operational characteristics of vertical players; a proprietary scoring of 43 mid-cap vertical software names; and 10 highlighted investment ideas including Autodesk, Global-E Online, PTC and Tyler Technologies.
Technology
Report by
Atlantic Equity Research
This damning 30-page report by Joe Gagan argues that PTC's management have made multiple material misstatements about their business - Joe argues that investors have been misled about the market acceptance and capabilities of its growth products and management have used the change to a new revenue recognition rule and the change to a new subscription billing method to cover up its real results. He sees similarities to recent cases brought by the SEC against Theranos, Nikola and Under Armour. TP $49 (50%+ downside).
PTC (PTC US) US
Technology
Report by
Atlantic Equity Research
PTC has been temporarily benefitting from the change to the new accounting revenue recognition rule 606 which has allowed it to recognise much more revenues up front compared to years past. This rule also allows the software company to spread sales commissions payments over a period of years lowering immediate costs. Calls to PTC's resellers last year revealed much lower sales levels to the resellers than PTC was getting itself. Results are overstated because of aggressive accounting manoeuvres. The truth will come out eventually.
