PTC's Long-Term IIoT Potential Is Attractive, But The Near-Term Macro Outlook Isn't

Considering that companies in the auto, electronics, and industrial categories make up about 60% of PTC’s (PTC) revenue base, I can understand why analysts and investors might be concerned about the near-term revenue growth outlook for the company, and particularly so considering the sizable shortfall in new subscription bookings for the first quarter. Management believes deal slippage, not macro issues, are the culprit, though, and it’s well worth noting that 2019 will be the year in which partnerships with Rockwell (ROK), Microsoft (MSFT), and ANSYS (ANSS) start to show some impact.

I wasn’t keen on PTC’s valuation back in July, and the nearly 20% drop since then doesn’t have me regretting that call, as these shares have lagged the market and rivals like Dassault (OTCPK:DASTY) and Autodesk (ADSK). I do like this business, though, and I’m still very bullish on the prospects for the company’s industrial IoT (or IIoT) platform to drive meaningful revenue growth and some synergistic sales with the legacy CAD/PLM/SLM offerings. Valuation remains a concern for me, though, and particularly with potentially building macro headwinds; it’s a toss-up call for me now, but definitely a name I’d revisit at a lower valuation.

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PTC's Long-Term IIoT Potential Is Attractive, But The Near-Term Macro Outlook Isn't