Majesco (NYSE: MJCO) remains under pressure even on reporting stellar Q2 financial results depicted by strong revenue growth. The company is also fresh from making strategic moves as it seeks to accelerate cloud growth. The company has also embarked on an acquisition drive as it looks to strengthen and affirm its long growth and prospects.
Majesco Price Analysis
The string of positive developments is yet to have the desired impact on the stock’s sentiments in the market. The stock has continued to edge lower in continuation of a sell-off wave that begun mid this year. After consolidating within a tight trading range of between $7 and $8 a share, the stock is yet gain on the receiving end.
A breach of the $7 a share support level, appears to have fuelled the recentsell-off wave. After the recent plunge, the stock faces immediate support at the $6 a share level. A breach of the $6 a share handle would leave the stock vulnerable to further declines with the next stop being the $5 a share level.
For the stock to continue powering high as was the case in the first half of the year, it needs to rally and stabilize above the $7 a share level. Given the strength of the underlying fundamentals, the stock could make a comeback after the recent sell-off.
Why Majesco Could Bounce Back
Solid Q2 Financial Results
Majesco is fresh from posting stellar Q2 financial results that affirms operational efficiency as well as long-term growth prospects. According to the Chief Executive officer, Adam Elster Q2 financial result underscores the growing success of the company’s cloud-based strategy and solutions.
Revenue in the quarter was up 12.2% to $34 million, compared to $30.3 million reported a year earlier. Net income ballooned to $2.8 million or $0.07 a share, compared to a net loss of -$0.7 million or $0.02 a share reported last year same quarter. A Surge in net come came on improved performance on revenue.
The number of customers that the company services increased by 30% in the quarter which led to a 41% increase in cloud revenues year-over-year.
“The strong cloud revenue growth we continue to experience demonstrates Masco’s ability to deliver “speed to value” to customers while providing a modern platform for insurers to innovate new products and business models,” said Mr. Lester.
Accelerating Cloud Growth
Buoyed by the second quarter stellar performance, the global provider of cloud insurance solutions has already started making strategic moves all in the effort accelerating revenue growth. The company intends to use part of the $35 million raised from a recent offering on Exaxe acquisition.
Exaxe is an EMEA based could software provider that Majesco is acquiring to expand its operations in the life, pensions and wealth management segment. Headquarter in Dublin Ireland, Exaxe should also expand the company’s operation in the European Union.
Part of the funds will also go towards paying off debt as the company seeks to strengthen its balance sheet. Any remaining funds will go towards financing future acquisitions set to strengthen Majesco cloud and speed to value market across all the insurance market segments.
A recent plunge in Majesco share price is not as a resultof operational inefficiency. For starters, the company has shown it is in a phase of robust growth depicted by revenue growth. A move to acquire Exaxe also attests the company’s willingness and readiness to spend all in the effort accelerating revenue growth.
The company moving to clear off its toxic debt also underscores its commitment to pursuing long-term value. Taking into consideration recent development,it is clear that Majesco is due for a bounce back on investors taking note of the solid underlying fundamentals.