Morgan Stanley analyst Elizabeth Porter maintained a Hold rating on Freshworks (FRSH – Research Report) today and set a price target of $24.00.
Elizabeth Porter has given her Hold rating due to a combination of factors surrounding Freshworks’ performance and forward-looking expectations. Freshworks has shown resilient revenue growth and a stable macroeconomic environment, paired with strong execution, which has led to a positive end to the fiscal year. Despite this, the forecast for the fiscal year 2024 indicates that while revenue targets are aligning with consensus estimates, offering potential for upside, the margin expansion remains limited. This muted operating profit margin (OPM) projection is attributed to incremental investments, which, while suggestive of confidence in future demand, temper near-term profitability.
Furthermore, Freshworks demonstrated solid performance with existing customers, showcasing reduced churn rates and increased sales expansion quarter over quarter. The improvement in the net revenue retention (NRR) rate further underscores this trend. However, guidance suggests a conservative outlook on NRR, which, although likely understated given the stable market conditions, still impacts the Hold rating. The company also saw a record number of large new deals, signaling strength in attracting substantial customers. Nevertheless, the anticipated revenue growth for FY24, at 18-19%, reflects durability but not a significant enhancement from the previous year’s figures. Combined with the one-time events of the previous fiscal year and ongoing investments in research and development and sales and marketing, these factors culminate in Porter’s decision to maintain a Hold rating on Freshworks’ stock.
In another report released today, Barclays also maintained a Hold rating on the stock with a $20.00 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.
Read More on FRSH:
- Freshworks Reports Fourth Quarter and Full Year 2023 Results
- Freshworks, Inc. Class A (FRSH) Q4 Earnings Cheat Sheet
- JPMorgan ups Freshworks target but ‘tactically cautious’ into earnings
- Freshworks Announces Strategic Collaboration Agreement with AWS to Increase the Reach of its AI-boosted Software-as-a-Service
- Freshworks enters collaboration agreement with AWS
