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New Relic Inc. (NYSE: NEWR) shares made a handy gain on Friday after one key analyst issued a call with massive upside for the stock. While there may be some concerns over the stock, Wedbush believes that they are far overblown and investors should be able to take advantage.

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Wedbush reiterated an Outperform rating with a $124 price target, implying upside of 42% from the most recent closing price of $87.41. The firm noted that despite strong fourth-quarter revenue and billings performance, shares have been pressured by several factors:

1. An initial FY20 EPS guide below consensus due to ramped R&D spending.
2. Fears about competition from infrastructure rival Datadog.
3. Uncertainty concerning New Relic One adoption.
4. A challenging billings comparison for 2Q/ Sept.

The firm also said that investors can profit from a contrarian stance on these concerns, which look overblown, per Wedbush’s industry checks and analysis. While most high-growth software stocks have seen significant expansion of multiples this year, New Relic’s 6.9x EV/ CY20E revenue is near two-year lows and well below peers in the 30% plus growth range, a pace that the company likely will maintain in fiscal 2020.

Wedbush further detailed in its report:

Now that New Relic has provided initial fiscal 2020 guidance, the company will likely be able to beat and raise this guidance based on its market momentum, solid sales execution capabilities, and predictable SaaS model. We agree that the second quarter/September billings comparison is more challenging, but this is clear from the numbers and now appreciated by investors. Moreover, consensus estimates for second quarter deferred revenue [$253 million, +38% Y/Y] and billings [$147 million, +20% Y/Y] look highly achievable, although the company may (or may not) guide at this level given uncertainty about the size of large renewal orders.

Shares of New Relic were last seen up nearly 2% at $89.06, in a 52-week range of $70.30 to $114.78. The consensus price target is $118.85.

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