Freshworks stock target cut, maintains buy amid growth potential By Investing.com

On Wednesday, Freshworks Inc (NASDAQ:FRSH) saw its price target adjusted by Canaccord Genuity, now aiming for $17, a decrease from the previous $20 target. Despite the reduction, the firm continues to hold a Buy rating on the stock.

The adjustment comes as the software company trades at what is perceived as a lower risk, given its current valuation compared to peers, operational metrics, and the sum of its parts. The analyst from Canaccord Genuity believes that Freshworks presents a low-risk opportunity in the small to mid-cap (SMID) software sector.

The expectation is that the downside risk is limited, with the stock’s valuation potentially remaining stable as growth continues, albeit at a decelerating pace.

The potential for upside was also noted, with the possibility of a gradual reacceleration of growth beginning in 2025. This could lead to investors recognizing Freshworks for achieving what is known as the Rule of 40 metrics by 2026, a balance of growth and profitability that is often sought after in the software industry. The analyst suggests that such recognition could result in multiple expansions for the stock.

Furthermore, the analysis did not take into account the additional benefits that could arise from traction with Generative AI technology or from any strategic interest in Freshworks. The revised price target of $17 reflects a more precise alignment with the firm’s sum-of-the-parts (SOTP) analysis, which considers the value of the company’s individual segments.

In summary, Canaccord Genuity’s stance on Freshworks remains positive, with the firm encouraging investors to reassess the company’s potential, leading to the maintained Buy rating.

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