Guggenheim has maintained a Buy rating on Smartsheet Inc . (NYSE: NYSE:SMAR), increasing the price target to $62 from the previous $60.
The adjustment comes after the company reported robust second-quarter fiscal year 2025 results, which showcased improved business momentum. This performance was highlighted by a significant growth in New Annual Recurring Revenue (ARR), contrasting with other software companies during the same period.
Smartsheet exceeded consensus expectations in all metrics. While the overall annual revenue forecast remained unchanged, the guidance for subscription revenue was raised due to a lower projection for professional services revenue as a percentage of total revenue. The company also increased its annual free cash flow (FCF) guidance by 9% to $240 million.
The enterprise software provider noted a sustained strong demand from large enterprises, including its biggest expansion deal to date. However, increased churn among smaller companies was observed, rising to 4.5% from the recent 4%.
Smartsheet's management expressed confidence in the feedback from customers who have transitioned early to the new pricing model, which is expected to be mandatory for renewals starting in January.
The company's CEO, Mark Mader, anticipates that the change in pricing could potentially double the user base, leading to a significant increase in ARR.
The projection is based on the expectation that customers will engage more fully with the platform under the new industry-standard pricing structure. The analyst from Guggenheim pointed out that even after raising the price target, the valuation remains attractive at 7.1 times the estimate.
In other recent news, Smartsheet company posted better-than-expected second-quarter results, with an adjusted earnings per share of $0.44, surpassing analyst estimates of $0.29.
The quarter's revenue reached $276.4 million, marking a 17% year-over-year increase, slightly exceeding the consensus estimate of $274.29 million. Additionally, Smartsheet's annualized recurring revenue (ARR) saw a 17% YoY growth, reaching $1.093 billion.
Citi has raised the price target for Smartsheet to $63, maintaining a Buy rating on the shares, while Canaccord Genuity has increased its target to $60, also maintaining a Buy rating. These adjustments are following recent discussions surrounding potential mergers and acquisitions involving the company.
Looking ahead, Smartsheet anticipates third-quarter revenue to be between $282 million and $285 million, representing a 15% to 16% YoY growth. The company has raised its full-year outlook, now projecting revenue of $1.116 billion to $1.121 billion.
InvestingPro Insights
As Smartsheet Inc. (NYSE:SMAR) garners attention with its recent earnings performance and Guggenheim's price target adjustment, InvestingPro data and tips provide further context for investors. The company holds a market capitalization of $6.83 billion, which is a testament to its significant presence in the enterprise software market. Despite a negative P/E ratio of -80.11, reflecting its current lack of profitability, the company's gross profit margin stands impressively at 81.61% for the last twelve months as of Q2 2025, indicating strong operational efficiency in generating revenue from its core activities.
InvestingPro Tips highlight that Smartsheet is expected to become profitable this year, as analysts predict, which aligns with the company's own optimistic outlook. Moreover, the company holds more cash than debt, providing it with a solid financial foundation to support its growth strategies. It's worth noting that Smartsheet does not pay a dividend, which may be relevant for income-focused investors. For those interested in Smartsheet's stock stability, it generally trades with low price volatility and is trading near its 52-week high, reflecting investor confidence.
For investors seeking a deeper dive into Smartsheet's financial health and future prospects, there are additional InvestingPro Tips available at https://www.investing.com/pro/SMAR. These insights can further inform investment decisions in the context of the company's current valuation and market performance.
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