Truist cuts Informatica price target to $24, maintains Buy rating

On Friday, Truist Securities adjusted its price target on Informatica (NYSE:INFA) shares, bringing it down to $24 from the previous $34, while keeping a Buy rating on the stock. The revision followed what was described as a "messy" fourth quarter for the data management company, with performance and guidance for 2025 falling short of expectations. According to InvestingPro data, the company maintains impressive gross profit margins of 80.25% despite recent challenges.

The earnings call highlighted various factors that negatively impacted the quarter's results. In after-hours (AH) trading, Informatica's shares plummeted by 33%, trading near $17 as investors sought clarity. With a market capitalization of $7.7 billion, Truist Securities analyst Miller Jump cited the combination of multiple issues that led to the disappointing quarter, which prompted the firm to revise both its estimates and price target for Informatica.

Despite the significant drop in share price and the lowered price target, Truist Securities reaffirmed its Buy rating for Informatica. The analyst believes that the stock's low liquidity has exaggerated the sell-off. InvestingPro analysis shows the company maintains a GOOD overall financial health score, with liquid assets exceeding short-term obligations. They suggest that market stability, rather than the potential for significant growth, could be the key to price appreciation for Informatica's shares from their current levels.

Investors reacted sharply to the news, as indicated by the substantial decline in Informatica's stock price in after-hours trading. The new price target of $24 represents a more conservative valuation by Truist Securities, in light of the recent quarterly performance and the company's outlook for the coming years.

As the market digests this new information, Informatica's future performance will be closely watched to see if the company can stabilize and recover from this challenging period. Truist Securities' stance indicates a belief in the company's ability to regain its footing, despite the current headwinds. InvestingPro subscribers can access 8 additional ProTips and comprehensive valuation metrics to better understand the company's potential recovery path.

In other recent news, Informatica has been in the spotlight due to a series of developments. The company's Q4 results showed a decline, particularly in the area of renewals and churn within both the on-premise and cloud segments. This has led to a reduction in the company's revenue and profitability outlook for 2025, including cloud Annual Recurring Revenue (ARR) growth.

In response to these developments, Baird analysts downgraded Informatica's stock from Outperform to Neutral and also reduced the price target to $19.00 from the previous $35.00. Despite Informatica posting adjusted earnings per share of $0.41, surpassing the consensus forecast of $0.38, its Q4 revenue of $428.3 million fell significantly below the anticipated $456.86 million.

Informatica's Cloud Subscription ARR grew 34% YoY to $827.3 million in Q4, although this was below guidance by $8.7 million due to lower cloud renewal rates and weaker net new bookings. For the full year 2024, Informatica's total revenues increased 2.8% to $1.64 billion. The company expects 2025 revenue between $1.67 billion and $1.72 billion, representing about 3.4% growth at the midpoint.

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