Needham maintains Freshworks stock with $25 target

On Monday, Needham reiterated its positive stance on Freshworks Inc (NASDAQ: FRSH), maintaining a Buy rating and a $25.00 price target, representing a significant upside from the current price of $14.88. Following a series of meetings with Freshworks’ top executives, the firm expressed confidence in the company’s strategic direction. The discussions, held during Needham’s Bay bus tour last week, included insights from CEO Dennis Woodside (OTC:WOPEY), CFO Tyler Sloat, and CPO Srinivasan Raghavan. According to InvestingPro data, 10 analysts have recently revised their earnings estimates upward for the upcoming period, suggesting growing confidence in the company’s trajectory.

The company’s aggressive expansion into new Enterprise Service Management (ESM) sectors was a key highlight from the meetings. Freshworks is targeting departments such as HR, legal, and finance, with expectations that the HR segment could potentially generate over $100 million in product revenue. This expansion builds on the company’s impressive 20.79% revenue growth over the last twelve months, with current revenue reaching $720.42 million. Analysts at Needham believe that this goal is achievable, especially considering the success of the company’s IT Service Management (ITSM) product and the company’s strong gross profit margin of 84.27%.

Another significant point from the discussions was the on-schedule progress of Device42’s re-platforming. This development is seen as a positive indicator for the company’s future growth. Additionally, the Net Revenue Retention (NRR) rate appears stable, which is an essential factor for the company’s continued expansion.

Management’s efforts to promote a broader platform narrative for Small and Medium Business (SMB) Customer Experience (CX) customers were also noted, particularly with the introduction of Freshcaller. This strategy is part of Freshworks’ broader initiative to enhance its market position and product offerings.

Furthermore, the excitement surrounding Freshworks’ new Managed Service Provider (MSP) partnership through Unisys (NYSE:UIS) was mentioned as a promising development. This partnership could potentially open up new avenues for growth and customer acquisition.

Overall, Needham’s reiterated Buy rating and price target reflect optimism in Freshworks’ strategic initiatives and potential for significant growth in the ESM space. The company’s focus on expanding its product lines and partnerships appears to position it well for future success. InvestingPro analysis indicates that Freshworks is currently undervalued, with strong financial health metrics including more cash than debt on its balance sheet. For deeper insights into Freshworks’ valuation and growth potential, including 8 additional exclusive ProTips and comprehensive financial analysis, explore the full Pro Research Report available on InvestingPro.

In other recent news, Freshworks Inc has seen several analysts raise their stock price targets following its strong financial performance and future outlook. Piper Sandler analyst Brent Bracelin increased the price target to $24, citing Freshworks’ robust annual recurring revenue (ARR) growth and favorable risk-reward ratio. Cantor Fitzgerald’s Brett Knoblauch also raised the target to $22, highlighting Freshworks’ strategic move towards mid-market and enterprise customers. Meanwhile, Scotiabank (TSX:BNS)’s Nick Altmann set a new target of $19, acknowledging Freshworks’ financial outlook for 2025 and the potential reacceleration of its Customer Experience segment.

Oppenheimer’s Brian Schwartz lifted the price target to $24, emphasizing Freshworks’ strong fourth-quarter results and optimistic 2025 guidance. Canaccord Genuity increased their target to $23, noting the company’s efficient operating leverage and a new $400 million stock repurchase program. Freshworks’ advancements in artificial intelligence, particularly with its Freddy AI offering, were frequently mentioned as a highlight across analyses. Analysts express confidence in Freshworks’ ability to maintain growth, with several pointing to its competitive pricing and market positioning. Despite some concerns over the Customer Experience business, the overall outlook remains positive with expectations of continued financial strength and strategic growth.

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