Citi maintains Buy rating on Clearwater Analytics, reaffirms Buy rating

Citi has reaffirmed its Buy rating on Clearwater Analytics Holdings (NYSE: CWAN) with a steady price target of $28.00.

Following a series of investor meetings at the Citi Tech Conference, the firm's confidence in the company's growth trajectory was bolstered.

Clearwater Analytics, known for its SaaS solutions for investment accounting and analytics, demonstrated solid progress in acquiring new clients and maintaining high net revenue retention (NRR).

The company's stability and consistent performance were underlined during the conference, suggesting a positive outlook for investors.

Citi highlighted the upcoming Clearwater Connect user conference, scheduled for September 17-18, as the next significant event for the company. The event is anticipated to showcase new product launches and could further define the potential for cross-selling and NRR growth leading into 2025.

Clearwater Analytics' broad platform and market opportunities were noted as factors that likely tilt the risk/reward balance in favor of investors.

The firm's analysis indicates that Clearwater Analytics is well-positioned for sustainable growth, which is reflected in the reiterated Buy rating.

In other recent news, Clearwater Analytics has reported a significant 19% increase in revenue year-over-year for the second quarter of 2024, reaching $106.8 million. The robust growth is primarily attributed to the introduction of new products and expansion across North American and international markets.

In light of these positive results, the company has revised its revenue guidance for the year upwards, following a substantial increase in adjusted EBITDA margin to 31.3% and a 116.9% increase in free cash flow from operations, totaling $42.4 million.

Citi recently initiated coverage on Clearwater Analytics, highlighting the company's growth stage, driven by new customer acquisitions and a transition to offering multiple products. The firm also emphasized Clearwater Analytics' cost efficiencies realized through General Artificial Intelligence (Gen AI) and emerging revenue opportunities. Citi's analysis suggests that Clearwater Analytics is well-positioned to maintain or surpass its current growth trajectory.

Furthermore, Clearwater Analytics has appointed Fleur Sohtz as its new Chief Marketing Officer. Sohtz brings a wealth of experience from the financial services and technology sectors, expected to significantly contribute to Clearwater's growth and brand development.

In addition to these developments, Clearwater Analytics is investing in generative AI and expanding across Europe and APAC, specifically targeting the UK, French, and German markets. The company also plans to improve gross margins by 50 basis points year-over-year, targeting an 80% gross margin.

InvestingPro Insights

Recent data and analysis from InvestingPro provide a deeper look into Clearwater Analytics Holdings' (NYSE:CWAN) financial health and market performance. With a market capitalization of $5.22 billion, Clearwater Analytics stands out with a significant 20.82% revenue growth over the last twelve months as of Q2 2024, showcasing the company's ability to expand its revenue streams effectively.

InvestingPro Tips highlight that Clearwater Analytics is expected to grow its net income this year, which aligns with Citi's positive outlook on the company's growth trajectory. Additionally, the company's liquid assets surpass its short-term obligations, indicating a strong liquidity position that could support ongoing operations and investment in growth opportunities.

While the company is trading at high valuation multiples, such as a Price/Book ratio of 13.71, this could reflect investor confidence in its future prospects, as underscored by the stock trading near its 52-week high. Notably, the company has demonstrated a strong return over the last three months, with an 18.07% price total return, which may interest investors looking for companies with positive momentum. For those seeking more detailed analysis, InvestingPro offers additional tips on Clearwater Analytics, which can be accessed for further investment consideration.

The insights from InvestingPro, including the anticipated profitability and robust liquidity, support the optimistic view presented at the Citi Tech Conference and by Citi's reaffirmed Buy rating. These factors may be particularly relevant for investors who are considering Clearwater Analytics as a sustainable growth opportunity in the SaaS sector.

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