Positive Outlook for Freshworks Amidst Leadership Shift and Strategic Acquisitions: A Buy Rating

Needham analyst Scott Berg maintained a Buy rating on Freshworks (FRSH – Research Report) today and set a price target of $30.00.

Scott Berg has given his Buy rating due to a combination of factors that suggest a promising outlook for Freshworks despite some short-term challenges. The recently reported first quarter results for 2024, while mixed, were generally skewed towards the positive side. Berg acknowledges that while there has been caution in the small to mid-sized business (SMB) segment leading to trimmed full-year revenue guidance, and new foreign exchange headwinds, the company’s IT Management Solutions (ITMS) sales have continued to perform well. This underlying strength in a key product area supports the positive perspective.
Additionally, leadership changes indicate a strategic shift, with the promotion of President Dennis Woodside to CEO and the founder Girish Mathrubootham taking the role of Executive Chairman, which Berg views as a potential catalyst for fresh momentum. The acquisition of Device42, an IT Asset Management (ITAM) solution, is also highlighted as a strategic move that could enhance Freshworks’ offerings in the IT Service Management (ITSM) space, potentially leading to increased cross-selling opportunities. Berg believes that concerns about AI headwinds are exaggerated and that the company’s fundamentals remain strong, underpinning his Buy recommendation.

According to TipRanks, Berg is an analyst with an average return of -5.1% and a 40.04% success rate. Berg covers the Technology sector, focusing on stocks such as Dayforce Inc, DocuSign, and Sprout Social.

In another report released today, JMP Securities also maintained a Buy rating on the stock with a $21.00 price target.

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Freshworks (FRSH) Company Description:

Freshworks Inc provides software as a service platform that enables small and medium-sized businesses to support customers through e-mail, phone, website, and social networks.