On Wednesday, Cantor Fitzgerald adjusted its outlook on shares of Freshworks Inc (NASDAQ:FRSH), reducing the price target to $18.00 from $19.00, while maintaining an Overweight rating on the company's stock.
The adjustment followed a notable performance in after-hours trading, where Freshworks shares increased by 5.4%. This uptick was seen as a response to the stock's previous 43.5% decline over the year, contrasted with the Russell 2000 Index's 10.9% gain during the same period.
Freshworks reported strong quarterly results, surpassing expectations in both revenue and adjusted operating income. Moreover, the company raised its full-year revenue forecast by 1.4% and its adjusted operating income outlook by 3.3%.
The second quarter's revenue beat was significantly influenced by Freshworks' recent acquisition of Device42, which is also projected to contribute more to the full-year revenue than the increase in the company's guidance.
The company's IT Service Management (ITSM) product has been identified as a key growth driver, achieving the best win rates in the second quarter of 2024 compared to the past six quarters. Despite the challenges associated with integrating Device42 and developing a cloud-native product, the combination of Freshworks' ITSM offering and Device42 is expected to enhance the overall value proposition for customers.
Cantor Fitzgerald reaffirmed its positive stance on Freshworks, citing the stock's attractive valuation at less than five times the estimated 2024 enterprise value to sales ratio. However, the revised price target reflects a lower share count and a reduced cash position following the Device42 transaction.
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