THE SPARK: In a report issued Tuesday, Benchmark analyst Mark Schappel said he expects E2open's stock to hit $25 within the next year. That's 27 percent higher than Monday's close of $19.63.
Schappel believes E2open's analytical tools and other technology for connecting manufacturers with suppliers is becoming increasingly important as fluctuations in electronics prices become more volatile. E2open, which is based in Foster City, Calif., sells subscriptions to services that help manufacturers understand what is going on in the market and find suppliers that can give them the best deals.
Backed by the $52 million raised in its July IPO, E2open has been hiring more sales representatives to help reel in more business throughout the world. Schappel is confident the expansion will be successful. He expects E2open's annual revenue to top $100 million in the company's fiscal year ending in early 2015, up from $60 million in the year that ended in February 2012.
THE BIG PICTURE: E2open is among a new breed of software makers whose products are accessed over the Internet instead of installed on individual machines in their customers' offices. The concept, often called "cloud computing," is being embraced by more companies who believe it will help them save money on maintenance and software upgrades while also serving the needs of employees using a multitude of Internet-connected devices to get their work done.
In his report, Schappel cited recent research projecting that traditional software makers selling supply-management tools will grow by an average annual rate of about 9 percent through 2016 while cloud-computing specialists competing in the same field will post an average annual growth rate of 21 percent during the same period.
ANALYST TAKE: Despite his optimism, Schappel is worried about E2open's dependence on high-tech customers, especially in the telecommunications sector, for most of its revenue. That could backfire if there's a downturn in the industry, he said.
Schappel set a "Buy" rating on E2open.
SHARE ACTION: E2open's stock rose 98 cents, or nearly 5 percent, to $20.61 in afternoon trading. It peaked at $20.91 earlier Tuesday, the highest point since E2open's July IPO. Shares priced then at $15 and had ranged from $11.75 to $20.50 before Tuesday.