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On Friday, Baird analysts adjusted their stance on Informatica (NYSE:INFA), downgrading the stock from Outperform to Neutral. Accompanying this change, they also slashed the price target to $19.00 from the previous $35.00, placing it below the current analyst consensus range of $20-40. According to InvestingPro data, the stock appears slightly undervalued at current levels, despite trading at a high P/E ratio of 115x. This decision came in response to Informatica's reported decline in Q4 results, which were notably affected by weaker renewals and an increase in churn within both the on-premise and cloud segments of the business.
The analysts noted the negative impact of these trends on the company's revenue and profitability outlook for 2025, including cloud Annual Recurring Revenue (ARR) growth. While the company maintains impressive gross profit margins of 80.25% and achieved revenue growth of 6.98% in the last twelve months, this area had been a key element of Baird's formerly positive view on the stock. The downgrade reflects a reassessment of the company's future performance in light of the recent developments.
Informatica's weaker performance has led to a downward adjustment in expectations, despite what appeared to be an attractive valuation following a significant drop in share price after-hours. Baird highlighted that the lack of visibility, due to various factors currently affecting the company, has diminished their confidence in Informatica's stock. InvestingPro analysis shows the company maintains a GOOD overall financial health score, with liquid assets exceeding short-term obligations and moderate debt levels.
The reduced guidance on cloud ARR growth is particularly concerning for Baird, as it was a central component of their previous optimistic outlook for Informatica. The analysts' reassessment aligns with the observed challenges and the anticipated impact on Informatica's financial trajectory.
In conclusion, Baird's downgrade of Informatica to a Neutral rating, along with a substantial cut in the price target, suggests caution due to the company's weakened Q4 performance and lowered future guidance, which have contributed to a more uncertain outlook for the data management firm.
In other recent news, Informatica Inc . experienced a significant revenue miss in its Q4 report, despite surpassing earnings estimates. The cloud data management company reported adjusted earnings per share of $0.41, exceeding the consensus forecast of $0.38. However, revenue for the quarter came in at $428.3 million, falling short of the anticipated $456.86 million. This revenue miss was attributed to lower renewal rates and shorter durations of self-managed subscriptions, which led to a roughly $46 million reduction in upfront revenue recognition year-over-year.
Despite these challenges, Informatica's Cloud Subscription Annual Recurring Revenue (ARR) saw a 34% YoY growth to $827.3 million in Q4, albeit below guidance by $8.7 million. For the full year 2024, the company's total revenues increased 2.8% to $1.64 billion. Looking forward, Informatica anticipates 2025 revenue to be between $1.67 billion and $1.72 billion, indicating about 3.4% growth at the midpoint. These are among the recent developments concerning Informatica.
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