On Tuesday, Morgan Stanley (NYSE:MS) adjusted its stance on Enfusion Inc (NYSE:ENFN) stock, downgrading the rating from Overweight to Equal-weight, while simultaneously increasing the price target to $11.25, up from the previous $11.00. The stock is currently trading at $10.81, near its 52-week high of $11.38, reflecting strong momentum with a 23% return over the past year. This change comes as a response to the impending acquisition of Enfusion by Clearwater. According to InvestingPro analysis, the company maintains a Good financial health score.
The analyst at Morgan Stanley noted that the acquisition by Clearwater is prompting the downgrade, although the price target has been raised to align with the offer price being considered. According to the analyst, Enfusion has been performing towards the lower end of its projected outlook, or potentially even below it, despite achieving 15.78% revenue growth in the last twelve months.
The acquisition is seen as a way to expedite value realization for the company's shareholders, while also addressing past concerns such as Enfusion's limited public float and the perception of its dependence on the fluctuating startup hedge fund sector. Dive deeper into Enfusion's complete financial analysis with InvestingPro, which offers 12 additional valuable insights about the company's performance.
The new price target of $11.25 is derived from an estimated 18x multiple on the revised Base Case '26 adjusted EBITDA forecast of $78.3 million. Currently trading at an EV/EBITDA multiple of 55x and P/E ratio of 297x, this valuation represents a discount of approximately 3x and around 14% compared to vertical software industry peers. The discount is justified by the anticipated slower near-term growth and a reduced likelihood of significant medium-term revenue growth if Enfusion were to continue operating independently.
In other recent news, Enfusion's recent developments include a downgrade by Stifel analysts and a report of strong Q3 growth. Stifel downgraded Enfusion Inc's stock from Buy to Hold and reduced the price target to $11.25 following Enfusion's announcement of an acquisition agreement with Clearwater Analytics. The acquisition price represents a 13% premium over the stock's closing price and values the company at approximately 6.4 times its projected FY25 enterprise value/revenue. Stifel analysts believe the acquisition agreement is favorable for Enfusion and the offered price is fair for shareholders.
On the earnings front, Enfusion reported a successful Q3 in 2024, with a 15% increase in year-over-year revenue to $51.2 million and an adjusted EBITDA of $11.1 million. This robust growth was attributed to strategic execution, including attracting larger clients and expanding product offerings. The company's annual recurring revenue surpassed $200 million, marking a 14% year-over-year increase. Management remains confident in achieving its medium-term revenue growth target of 20% to 22% from 2025 to 2027. These are the recent developments for Enfusion.
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