An under-the-radar software company could yield investors as much as 35% upside, according to Morgan Stanley. The Wall Street bank wrote in a Monday note that Model N, a 24-year-old software provider for pharmaceutical and semiconductor companies, could be seeing “the next wave of growth.” Morgan Stanley began research coverage of Model N with an outperforming investment rating and $43 price target. Model N is down more than 19% so far in 2023 after jumping 35% in 2022. “We’re positive on Model N’s leadership position and 85% exposure to secular growth of Life Sciences and emphasize their best-in-class profitability relative to [competitors],” Morgan Stanley equity analyst Craig Hettenbach wrote. Model N, which went public 10 years ago this month , has “an attractive combination of near-term defensive characteristics and long-term secular growth drivers” thanks to a robust roster of pharmaceutical clients, Morgan Stanley said Model N’s software will play an essential role in firms figuring out their best pricing strategy after the Centers for Medicare & Medicaid Services starts negotiating prices for high-cost drugs starting in 2026, Hettenbach added. Morgan Stanley also noted potential downside risks to Model N, given its need to switch 30% of remaining customers to the “software as a service” model, exposure to a deeper-than-anticipated slump in the semiconductor industry at 15% of sales, stiff competition from companies with better access to more resources and a need to better control stock-based compensation.