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This Supply Chain Software Compounder Just Got Marked Down |
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This is not a flashy app business. It is infrastructure software for retailers and logistics teams that cannot afford broken inventory or late deliveries. |
The stock sold off with growth tech, but the operating story is shifting back toward renewals, AI add-ons, and cloud conversions. |
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| The Setup | Manhattan Associates Inc (NASDAQ: MANH) builds supply chain commerce software that helps companies run inventory, warehouses, order management, and omnichannel retail operations. | Shares are around $173, down about 37% over the past year, with a market cap near $10.4B. | Two things are driving the current setup: | A growing belief that 2026–2027 could bring a renewal cycle for early cloud customers that first signed up in the 2020–2022 cohort A steady drumbeat of platform upgrades, including agentic AI features inside Manhattan Active Omni
| Recent analyst actions reflect that shift. | One large bank upgraded the stock to Buy, pointing to the upcoming renewal window and a lower bar for new bookings if renewals deliver step-ups. | Another major firm reiterated a Buy rating and highlighted sustained cloud subscription growth potential, profitability, and free cash flow. |
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What Manhattan Actually Does | Manhattan sells the software layer that keeps modern commerce functioning. Retailers and logistics operators use it to answer questions that become existential at scale: | Where is the inventory right now Which store or warehouse should fulfill a digital order How do we route shipments to meet delivery promises How do we prevent stockouts and overstocks in the same week How do we run a store and a website as one connected system
| The product suite is broad, but the core idea is consistent: Manhattan sits in the operational spine of commerce, where switching costs are high because failures show up as missed deliveries, lost sales, and broken customer trust. | That is why the company has historically earned a premium valuation. When the software is embedded, it can become a long-term system of record. |
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Poll: When money feels tight, your default move is to… | |
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Why The Stock Has Been So Weak |
MANH traded as a premium growth name for years. When the market turned against high-multiple software, Manhattan did not escape the gravity. |
The stock is also carrying a valuation profile that gives investors less patience for deceleration. |
The key issue is not whether Manhattan has a good product. It is whether growth and bookings can re-accelerate enough to justify a P/E that still screens rich at roughly 49x. |
The market is essentially saying: great business, but show me the next leg of growth. |
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The Bull Case |
1) A cloud renewal wave can reset the growth cadence |
The most interesting near-term lever is the potential renewal cycle in 2026–2027 for cloud customers landed earlier in the decade. |
If those renewals come at full ramp, with price step-ups and broader product attach, they can lift cloud growth without Manhattan needing to land an abnormal number of brand-new logos. |
That is powerful because renewals tend to be: |
Lower friction than new customer wins More predictable when the product is embedded More margin-friendly, especially when bundled with add-ons
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2) AI agents can increase platform stickiness and monetization |
Manhattan has been rolling out AI agent capabilities within Manhattan Active Omni, including agents aimed at store associates, contact centers, and order management configuration. |
The practical value is not a hype demo. It is making frontline teams faster and reducing the operational burden of running complex omni workflows. |
If this works, it does two things at once: |
Makes the platform harder to replace Creates room for upsell, cross-sell, and higher average contract value
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3) Execution looks more stable after leadership transition |
After the CEO transition in early 2025, investor fear is usually about churn at the top. |
Instead, commentary from the Street has been that the broader executive team has remained stable, and the company is investing in product-level sales leadership in emerging categories. |
The key hire that keeps coming up is the new COO, with a mandate to build teams focused on renewals and cloud conversions. |
If that function scales well, it can improve renewal uplift and increase attach across the installed base. |
4) The model supports profits and free cash flow |
Even with modest topline growth, Manhattan has a reputation for generating real cash. |
That matters in a tape where investors are increasingly skeptical of software stories that require perpetual reinvestment to stay relevant. |
If growth re-accelerates even slightly, a cash-generative model can make the downside feel more limited, because the business is not forced to dilute or lever up to fund operations. |
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The Bear Case | 1) The multiple still leaves little room for disappointment | A 49x earnings multiple tells you the market is not treating this like a slow, defensive software vendor. | If cloud growth comes in softer than expected, or bookings fail to show visible acceleration, the stock can compress again even if the business remains healthy. | 2) Renewal optimism can prove early | The renewal-cycle thesis depends on timing and magnitude. | If customers delay conversions, push back on pricing, or renew at lower uplift than expected, the hoped-for visibility into 20%+ cloud growth becomes harder to defend. | This is the risk of a forward-looking catalyst: the market can price it before it shows up in reported results. | 3) Retail budgets are not always smooth | Even mission-critical software can face slower decision cycles when retailers get cautious. | If the macro environment tightens and retail technology budgets shift toward shorter-payback projects, transformation deals can slip. | Manhattan does not need a recession to get hit. It just needs slower sign-offs. | 4) AI features may not monetize as quickly as investors expect | Shipping AI agents is not the same thing as getting customers to pay more for them. | If AI becomes table stakes across enterprise software, differentiation may come down to workflow depth and proven ROI, not feature checklists. | |
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What I'd Watch Next | Cloud subscription growth and whether it trends back toward an acceleration narrative Bookings and RPO direction, especially signals that renewals are adding meaningful backlog Renewal uplift indicators, including pricing step-ups and product attach Adoption of Active Omni upgrades, particularly AI agents in real deployments Sales execution, including whether the renewals and conversions motion becomes a visible strength Next earnings update, since expectations are rising after the recent upgrades
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My Take | MANH looks like a high-quality operator that got repriced in a market that stopped tolerating premium software multiples. | The core product value proposition still makes sense, because inventory accuracy, order routing, and warehouse execution do not get simpler as commerce evolves. They get harder. | The next 12–24 months are about proving that the cloud model can compound again through renewals and conversions, while AI features deepen stickiness and raise contract value. | If renewals land with step-ups and attach improves, the stock can work without needing a heroic new logo surge. | The risk is straightforward: the business can remain excellent and the stock can still struggle if growth fails to clear the bar implied by the valuation. | For this to re-rate sustainably, investors need evidence that the renewal cycle is real, not just a talking point, and that AI-driven upgrades translate into measurable expansion inside the installed base. | |
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That's all for today. Thank you for reading. If you have any feedback, please reply to this email. | Best Regards, | — Adam Garcia
Elite Trade Club |
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