Morgan Stanley upgrades SailPoint stock rating to Overweight on growth

Investing.com - Morgan Stanley upgraded SailPoint Technologies Holdings (NASDAQ:SAIL) from Equalweight to Overweight on Tuesday, setting a price target of $25.00. The stock, currently trading at $20.64, has analyst targets ranging from $16 to $30, with a consensus leaning bullish at 1.89 (on a scale where 1 is Strong Buy). According to InvestingPro analysis, the stock appears overvalued at current levels.

The upgrade reflects SailPoint’s strong position in the identity governance and administration (IGA) market, where it commands over 20% market share as a category leader. With a market capitalization of $11.49 billion and impressive gross margins of 62.84%, SailPoint has demonstrated strong operational efficiency.

Morgan Stanley expects SailPoint to maintain a 28% annual recurring revenue (ARR) compound annual growth rate from FY23 to FY26, driven by its ongoing software-as-a-service transition and multi-billion dollar legacy replacement opportunities.

The firm noted SailPoint’s early success in expanding beyond its core offerings, with its Machine Identity solution contributing "low-millions" in ARR despite being in market for less than a year.

Morgan Stanley also highlighted that ARR contribution from SailPoint’s newer modules, including Machine Identity, Data Access Security, and Non-Employee Risk Management, more than doubled year-over-year as of Q1, supporting the company’s potential to sustain over 20% ARR growth.

In other recent news, SailPoint Technologies has reported notable developments. JPMorgan raised its price target for SailPoint to $26.00, citing a strong performance in its latest quarterly results, where annual recurring revenue, total revenue, and profitability surpassed analyst expectations. The company achieved a net dollar retention rate of 115%, with growth evenly split between new customers and existing customer expansion. Additionally, SailPoint’s Identity Security Cloud and IdentityIQ products have received SAP certification for integration with RISE with SAP S/4HANA Cloud, enhancing security for SAP applications.

TD Cowen has reaffirmed its Buy rating on SailPoint with a $30.00 price target, suggesting potential benefits from short-term demand following the Palo Alto Networks-CyberArk merger. Cantor Fitzgerald also maintained its Overweight rating and $29.00 price target ahead of the company’s upcoming earnings report. Meanwhile, JPMorgan upgraded SailPoint from Neutral to Overweight, highlighting its leadership in identity security and the opportunity to acquire shares at favorable valuations. These developments reflect a positive outlook from multiple analyst firms regarding SailPoint’s market position and future prospects.

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