Software-as-a-service company Freshworks has several positive catalysts ahead, according to Canaccord Genuity. Analyst David Hynes upgraded shares to buy from hold. He also increased his price target to $25 from $15. The new price target implies 37% upside from where shares closed on Tuesday. “There was a lot to like in Freshworks’ Q2 print, the second in a row that we’d describe in that light,” Hynes said in a Tuesday note. The company is “bringing it all together — [Go-to-market (GTM)] enhancements, operating efficiency, AI products and more,” Hynes added. The company posted its second-quarter results Tuesday. Freshworks’ operating margins in the second quarter demonstrated significant upside and improved marketing and sales efficiency, Hynes said. Revenue growth also looks to remain stable near current levels, he added. The company has multiple AI-powered software offerings, such as Freddy Self-Service, Copilot and Insight. According to the analyst, the potential of AI-driven upside has not yet been factored into guidance. To be sure, Hynes noted that the stock’s EV-to-revenue multiple of about 7 is not particularly cheap relative to its operating profile. However, given its tailwinds from GTM improvements, new and higher-priced SKUs and stabilizing net revenue retention dynamics make the company a compelling buy, said Hynes. Shares popped more than 15% before the bell. The stock has gained 24% in 2023. —CNBC’s Michael Bloom contributed to this report.
