The TechnologyOne Ltd (ASX: TNE) share price was on form on Wednesday.
The enterprise software company’s shares stormed 5% higher to reach a record high of $11.77.
This means the TechnologyOne share price is now up over 42% since the start of the year.
Why did the TechnologyOne share price storm higher?
The catalyst for the rise in the TechnologyOne share price was a bullish broker note out of Bell Potter.
According to the note, the broker has upgraded the company’s shares to a buy rating and lifted its price target on them by 28% to $12.50.
Based on the current TechnologyOne share price, this price target still implies potential upside of 6.2% over the next 12 months even after yesterday’s gain.
What did the broker say?
Bell Potter notes that last month the company announced the progressive cessation of support from October for customers who use its on-premise solution.
The broker believes this move will accelerate the rate of customers switching to its software-as-a-service (SaaS) offering. And with support ending in October 2024, the broker highlights that this gives a clearer indication of when TechnologyOne will become pure SaaS company.
Bell Potter also notes that many of its peers have seen their respective share prices rise strongly recently. This has led to changes in the multiples it feels the TechnologyOne share price should trade at.
In light of this, the broker has updated each valuation used in the determination of its price target for market movements and also for time creep.
Its analysts explained: “The net result is a 28% increase in our PT to $12.50 which has largely been driven by an increase in the relative valuations due to the recent share price rally in some of the comps.”
“A potential catalyst for the share price is the release of the FY21 result in November where we expect the guidance to be met which would imply a strong 2HFY21 result and importantly strong SaaS ARR growth of 35% or more,” it added.