Note: The Skinny blog is written by Rick Smith, editor and co-founder of WRAL Tech Wire and business editor of WRAL.com.

RESEARCH TRIANGLE PARK, N.C. – SciQuest (Nasdaq: SQI) continues to draw positive reviews from Wall Street analysts, the latest endorsement coming Friday morning from Canaccord Genuity.

Analyst Richard Davis initiated coverage of SciQuest with a “buy” rating and a stock target price of $20.

In a very positive, lengthy research note, Davis headlined it this way:

“At the foothills of a large opportunity.”

SciQuest provides e-procurement services to a growing list of private and public sectors, from universities to hotels. And the company continues to grow. In a lease deal disclosed this week through a regulatory filing, SciQuest is adding 4,000 square feet to its 45,000-square foot headquarters in Cary in a deal with Duke Realty.

The SciQuest story has been told often – from its debut as a “dotcom” phenom and a hot IPO in the medical and lab supply business to a complete restructuring, refocusing and going private, to reemergence with an IPO last September. (CEO Stephen Wiehe, who led the firm’s turnaround, and other company execs rang the Nasdaq opening bell on April 1.)

Its stock traded as high as $18.45 last month and closed at $16.39 on Thursday. The low is $10.50.

“SciQuest looks to have a long addressable market runway as well as a near-term
upward bias in organic growth,” Davis wrote. “In a market that is nervous about the impact of a softening economy on fundamentals, SQI looks like an attractive opportunity. We are initiating coverage with a BUY rating and $20 price target.”

Since its launch, three other firms have followed SciQuest with positive ratings, according to Thomson First Call.

Davis likes SciQuest for several reasons, including the “big problem” it addresses by helping clients acquire products. He sees a “roughly $3 billion annual opportunity” to help a potential customer base of 5,600 companies and institutions. Of those, only 4 percent are current SciQuest customers.

Companies that pick e-procurement and related services can save “roughly 10 times the subscription cost of the software,” he added. (SciQuest operates a software-as-a-service model – i.e., selling its service online rather than in shrink-wrapped or downloadable packages.)

So why does SciQuest win in a market with such big potential?

“Industry focus enables SciQuest to tailor its workflows to its customers’ relatively unique processes,” Davis wrote.

“In addition, SciQuest has found that it can spool up and maintain the supplier network better by not charging suppliers to be on the network (unlike the business models of other
procurement firms).”

Davis also says SciQuest is a potential success because of deliverable value, not Internet hype.

“We are almost 10 years past the point where investors lost their valuation bearings on Internet-based procurement companies (they’ve moved onto other things like Social Media it appears),” he explained.

“The good news is that procurement has become mainstream, the space is not crowded with overfunded VC-backed upstarts, and SQI is one of the leaders in a space large enough to support a handful of viable businesses.”

By the way, Wiehe and Chief Financial Officer Rudy Howard will be telling the SciQuest story on June 15 at the William Blair Growth Stock Conference in Chicago. Blair is one of the firms that covers SciQuest.

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