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Tyler (TYL) Hits 52-Week High: What's Pushing Up the Stock?

Zacks Equity Research

Shares of Tyler Technologies Inc. TYL scaled to a new 52-week high of $306.4, eventually closing a tad lower at $306.24 on Jan 2.

The stock has soared 73.4% in the past year, substantially outperforming the 22.5% rally of the industry it belongs to.

This outperformance can be attributed to the growing number of software subscription deals. Its broad line of software solutions and services, which aids in fulfilling the IT needs of major areas of operations for cities, counties, schools and other government entities is a tailwind.

Rationale Behind the Rally

Tyler is gaining traction from robust growth in new business. The company has been continually enhancing its core software applications and expanding complementary product and service menu to fulfill the changing needs of customers and respond to the technological advancements.

Notably, Tyler signed 288 new software contracts in the last reported quarter. Management mentioned that the company already surpassed the total number of deals inked in 2018 through the first nine months of 2019.

In the third quarter, the company added 150 subscription-based arrangements and converted 20 existing on-premises clients, accounting for nearly $47 million in total contract value.

Tyler has also been pursuing strategic takeovers to widen its product and service portfolio, enter new markets related to local governments, attract clients and expand geographically. Investments and acquisitions are helping it strengthen its competitive edge and exploit new and expanding opportunities.

On the last earnings call, management mentioned that the company snapped up 22 new ERP and public safety deals in the third quarter including Socrata's Data-as-a-Service platform. It also recorded seven wins with CaseloadPRO, now branded as Tyler Supervision.

Moreover, the company’s latest collaboration with Amazon’s cloud computing arm Amazon Web Services is likely to boost its cloud-first strategy.

We believe, a solid uptrend in subscription revenues, backed by large SaaS contract wins, will be a key driver for the company.

Zacks Rank & Stocks to Consider

Tyler currently has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Baidu BIDU, Marchex MCHX and Synopsys SNPS, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Baidu, Marchex and Synopsys is currently pegged at 2.3%, 15% and 12.8%, respectively.

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Marchex, Inc. (MCHX) : Free Stock Analysis Report
 
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