Buying Opportunity: Informatica’s Growth and Cash Flow Potential Underscored Amid Acquisition Speculation

Analyst Koji Ikeda from Bank of America Securities reiterated a Buy rating on Informatica (INFA – Research Report) and keeping the price target at $39.00.

Koji Ikeda’s rating is based on the long-term potential of Informatica, despite recent developments that may have concerned investors. The announcement that Informatica is not currently in talks with any potential acquirers, including Salesforce, has led to a drop in stock price. However, Ikeda believes this pullback presents a buying opportunity for investors. He remains confident in Informatica’s ability to disrupt the data management industry and gain market share, which he expects to sustain growth and generate robust free cash flow in the future. The company’s guidance for 2024, which includes an impressive 35% year-over-year cloud subscription ARR growth, has been reiterated, reinforcing the positive outlook.

Additionally, Ikeda has identified the expected outperformance of Informatica’s first-quarter 2024 adjusted unlevered free cash flow as a significant catalyst. This metric is anticipated to exceed 100% of non-GAAP operating income, far surpassing market expectations. Considering that Informatica’s shares are trading at a much lower multiple of expected cash flow compared to its peers, this beat in cash flow is poised to act as a strong positive driver for the stock price. With a price objective set at $39, indicating a 25% upside from the current price, Ikeda reiterates his Buy recommendation, viewing the current valuation as an attractive entry point for investors.

In another report released yesterday, Wells Fargo also maintained a Buy rating on the stock with a $40.00 price target.

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Informatica (INFA) Company Description:

Informatica Inc is a pioneered a new category of software, the Intelligent Data Management Cloud, or IDMC. IDMC is a AI-powered platform that connects, manages, and unifies data across any multi-cloud, hybrid system, empowering enterprises to modernize and advance data strategies.