This Insider Changed His Tune From Seller To Buyer

The last time John McDonald bought Upland Software, Inc. (UPLD) was in November 2014. He purchased 96,154 shares at $12 for a little more than $1.1 million. Three years later, McDonald started selling UPLD shares at $21.48.

And he sold and sold and sold some more. All in all, the Chief Executive Officer (CEO) sold 27 times from 2017 through early 2021, unloading more than 892,057 Upland Software shares, collecting $31,041,680. CEO McDonald’s selling streak came to an end on August 8, 2022, beginning a new wave of buying, acquiring 80,000 in four transactions for a total outlay of $887,300. (1)

Upland Software provides cloud-based enterprise work management software. The tech company offers a family of software applications under the Upland brand in the areas of marketing, sales, contact center, project management, information technology, business operations, and human resources and legal. The company also provides professional services, such as implementation, data extraction, integration and configuration, and training services, as well as customer support services.

UPLD recently reported second quarter earnings and sales that exceeded Wall Street’s expectations. The Zacks consensus was $0.45 per share on sales of $79.3 million. The company reported profits of $0.55 per share and revenue of $80.23 million. (2)

In the quarterly announcement, McDonald told shareholders, “We had a strong Q2, beating our guidance midpoints on revenue and Adjusted EBITDA, even after FX headwinds, and outperforming our targets on operating and free cash flow.”

“In addition, after the quarter close, we announced a $115 million strategic equity investment from HGGC, a leading $6.8 billion private equity firm with a proven track record of building value in the software industry by partnering with management teams to enhance customer value and drive growth.” (3)

We can’t say for sure, but it could be the $115 million investment that motivated McDonald to turn from an insider seller to buyer. It’s also possible that the CEO is bargain hunting as UPLD shares are trading at a multi-year low.

A lack of growth could be what is hurting Upland’s stock price. Zacks forecast earnings per share of $1.79 this year and just $1.80 for next year. Sales are also supposed to be relatively flat year over year, $316.09 million in 2022 and $323.97 million in 2023. (4)

With the sales, profits, and the stock price under pressure, Upland trades at a discount relative to its industry averages. The typical peer is valued at 29.4 times earnings (P/E) and at 4.2 times sales (P/S) compared to 16 and 1.1, respectively, for UPLD.

If Upland were to hit Zacks’ 2023 profit and sales targets and trade at the industry averages for P/E and P/S, UPLD would hit $59.20 on a P/E basis and $48.89 based in P/S. If Upland maintains its current valuations, then it would price out at $28.80 and $11.23, using P/E and P/S. Meanwhile, Wall Street has a one-year price target of $17.43. (5)

OVERALL: Upland Software, Inc. (UPLD) does appear to offer investors some upside potential. It is somewhat concerning that sales and profits are expected to stall for the next 18 months or so. Investors might also wait for the UPLD shares to stop falling before entering new positions.

UPLD is only appropriate for aggressive investors with above average risk tolerance at a time horizon of at least 18 months.


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