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On Wednesday, Scotiabank (TSX:BNS) analyst Nick Altmann increased the price target on Freshworks Inc (NASDAQ:FRSH) to $18.00, up from the previous $14.00, while maintaining a Sector Perform rating on the company’s shares. Currently trading at $14.34, the company demonstrates impressive gross profit margins of 84.39% and maintains healthy liquidity with a current ratio of 2.89. Altmann highlighted Freshworks’ maintained billings growth outlook and a slight upward revision to its fiscal year 2025 revenue forecast as positive factors, stating these adjustments are "good enough" considering the current market sentiment, valuation, and the company’s strong free cash flow support. According to InvestingPro analysis, Freshworks appears undervalued based on its Fair Value estimate.
The analyst noted that Freshworks has not seen any significant macroeconomic impacts, which may lead investors to adopt a more constructive view on the company’s first-quarter earnings within the software sector. InvestingPro data reveals several positive indicators, including strong financial health metrics and expectations for net income growth this year. Management has indicated no material changes in the business environment. Altmann also pointed out the stabilization in underlying metrics, such as the 105% net revenue retention rate for the third consecutive quarter, steady growth in large customer key performance indicators, and a reacceleration in total customer growth. InvestingPro subscribers have access to 8 additional key insights about Freshworks’ financial health and growth prospects.
Freshworks’ Experience (EX) segment continues to grow at a rate exceeding 30%, while the Customer Experience (CX) segment maintains high single-digit growth rates. The company’s overall revenue growth stands at 20.46%, with total revenue reaching $751.55 million in the last twelve months. Although Freshworks has stopped disclosing figures from Device42, Scotiabank estimates organic billings growth at approximately 12%. This estimate supports the maintained billings growth framework despite potential macroeconomic challenges that could arise in the second half of the year.
Altmann also mentioned that Freshworks appears to be well-positioned to face broader macroeconomic weaknesses, with average selling prices at a steep discount compared to peers and a compelling time to return on investment. Additionally, the company’s artificial intelligence offering, Freddy Copilot, is driving increased productivity of about 30% within its installed base, further supporting operational efficiencies. The revised price target to $18 reflects these considerations. For a comprehensive analysis of Freshworks’ valuation and growth prospects, investors can access the detailed Pro Research Report available on InvestingPro, which provides expert insights and actionable intelligence for informed investment decisions.
In other recent news, Freshworks Inc. has reported strong financial results for the first quarter of 2025, exceeding analyst expectations. The company announced non-GAAP earnings per share of $0.18, surpassing the consensus estimate of $0.13. Revenue for the quarter reached $196.3 million, exceeding the anticipated $192.08 million, and marking a 19% increase year-over-year. Freshworks also reported billings of $203 million, which was above the consensus estimate of $198 million, with a 16% year-over-year increase. JMP Securities has maintained a Market Outperform rating for Freshworks, reflecting confidence in the company’s performance. The company added over 1,000 new clients, highlighting successful customer acquisition and ongoing growth in its customer base. Freshworks plans to continue investing in AI product development and monetization, with a projected revenue range of $815.3 million to $824.3 million for the full year 2025, indicating a growth rate of 13-14%.
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