On Thursday, JPMorgan (NYSE:JPM) adjusted its stance on Clearwater Analytics Holdings (NYSE:CWAN), downgrading the stock from Overweight to Neutral and reducing the price target to $22 from the previous $24.
The firm anticipates the shares to face downward pressure at the market open due to a significant drop in net new Annual Recurring Revenue (ARR) and a decrease in the Net Revenue Retention (NRR) ratio. Additionally, commentary regarding the performance of the Jump division has influenced this outlook.
The revision in rating and price target follows Clearwater's revenue growth guidance for the fiscal year 2024, which is expected to fall below 19% year-over-year at the highest end of the range. This guidance is also 1.5 percentage points below the consensus at the midpoint.
JPMorgan expressed continued belief in the long-term potential of Clearwater Analytics but noted that the fiscal year 2024 could remain challenging. Factors such as intense price competition are anticipated to delay the achievement of the long-term target of 115% NRR.
In response to these developments, JPMorgan has incorporated a more conservative growth forecast into their valuation, leading to an 8% decrease in the price target. The downgrade to Neutral reflects a comparison with other companies in JPMorgan's vertical software coverage.
Clearwater Analytics Holdings specializes in providing investment portfolio data, analytics, and reporting services. The company's recent guidance has set a cautious tone for its performance in the upcoming year, prompting JPMorgan to recalibrate its expectations for the stock's trajectory.
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