Why another broker thinks you should buy Aconex Ltd shares

Credit: U.S. Army Corps of Engineers

Shares of Aconex Ltd (ASX: ACX) have found a fresh burst of energy after UBS increased its price target on the shares.

After rising 5.8% on Monday, the shares have risen another 3.2% so far today. They’re currently trading for $6.23, but that is still 15.6% below UBS’s new price target of $7.20.

According to Dow Jones Newswires, the broker increased its target by 3.6% on Monday morning, suggesting its confidence in the business is growing. According to The Wall Street Journal, the average share price target on the company is $6.55 while the highest target price is $7.85.

Aconex isn’t a household name, but it is becoming increasingly well known in the global construction industry. The company provides construction collaboration services via its Software-as-a-Service (SaaS) platform, enabling organisations to collaborate across the lifecycle of construction projects. It also assists with document management, workflows, field management and asset hand-over.

Of course, listening to broker target prices is one thing, but investors do need to take them with a grain of salt. Aconex appears to be a quality business and has enjoyed an incredible run up in price (its shares have risen 142% in the last 12 months and 266% since late 2014), but it also provides for a highly cyclical industry. Aconex had this to say in its replacement prospectus prior to listing on the ASX:

Aconex’s core construction collaboration solutions software product targets the construction industry. As such, economic trends that negatively affect the construction industry may adversely affect the Company’s business by reducing the number of new projects being undertaken that Aconex may service or target to service.”

It continued: “A significant downturn in the construction industry may have a material adverse effect on Aconex’s business, financial condition, results of operations and prospects.”

Aconex is certainly worthy of further investigation by long-term investors, but investors should only buy once they are comfortable with the company’s value and future growth prospects, and have considered the potential headwinds facing the business.

If Aconex isn't quite what you're looking for, maybe you should consider The Motley Fool's top 3 blue chips for 2016 instead. These 3 'new breed' shares pay fully franked dividends AND offer the very real prospect of significant capital appreciation. Simply click here to gain access to this comprehensive FREE investment report.

No credit card required.

Motley Fool contributor Ryan Newman has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.