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On Monday, Morgan Stanley (NYSE:MS) initiated coverage on SailPoint Technologies Holdings (NYSE:SAIL), a company traded on NASDAQ under the ticker SAIL, with an Equalweight rating and established a price target of $26.00. Currently trading at $22.05, the stock sits near its 52-week low of $20.77. According to InvestingPro analysis, SailPoint appears fairly valued. The new price target is based on a detailed evaluation of the company’s future financial performance.
SailPoint, which specializes in enterprise identity governance, has been forecasted by Morgan Stanley to achieve a compound annual growth rate (CAGR) of 21% in annual recurring revenue (ARR) from 2023 through 2030. With current annual revenue of $824.2M and a robust gross profit margin of 63.81%, the company shows strong fundamental metrics. However, InvestingPro data indicates a weak financial health score of 1.73, suggesting some challenges ahead. The firm’s analysts project that by the end of the decade, SailPoint’s free cash flow (FCF) margin will expand to 27%.
The $26 price target has been derived by applying an enterprise value to free cash flow (EV/FCF) multiple based on the firm’s 2030 estimates, which suggests an enterprise value to calendar year 2026 (EV/CY26) sales multiple of approximately 12 times. With the next earnings report due on March 26, 2025, investors will be watching closely for updates on the company’s growth trajectory. This valuation is consistent with SailPoint’s primary peer, CyberArk Software (ETR:SOWGn) Ltd. (NASDAQ: NASDAQ:CYBR).
Morgan Stanley’s analysts believe the valuation is justified for several reasons. First, there is the potential for federal-related impacts to contribute to more modest upside revisions in SailPoint’s financials. Second, there is a need for further evidence of SailPoint’s success beyond its core identity governance and administration (IGA) market.
The firm’s approach to setting the price target for SailPoint involves a long-term view, emphasizing the company’s growth trajectory and margin expansion potential over the next several years. The application of a 37 times multiple on the company’s projected 2030 free cash flow underpins the price target, aligning SailPoint’s valuation with market expectations for its industry segment.
In other recent news, SailPoint Technologies Holdings has been the focus of several analyst evaluations, each offering insights into the company’s future prospects. BMO Capital Markets has given SailPoint an Outperform rating with a price target of $26, highlighting the company’s potential to capitalize on the increasing importance of identity security. Jefferies also initiated coverage with a Buy rating and a $26 price target, expressing confidence in SailPoint’s ability to achieve over 20% growth in Annual Recurring Revenue over the next three years. Meanwhile, Goldman Sachs set a Neutral rating with a $23 target, acknowledging SailPoint’s market share growth but considering the stock fairly valued at its current price. JPMorgan also assigned a Neutral rating with a $25 target, noting the company’s strong market position and expected growth in recurring revenue. Lastly, RBC Capital Markets rated SailPoint as Outperform with a $27 target, citing the company’s potential to sustain robust growth while improving profit margins. These recent developments reflect a range of perspectives on SailPoint’s market positioning and financial outlook.
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