On Wednesday, BTIG adjusted its stance on HashiCorp Inc (NASDAQ: NASDAQ:HCP), downgrading the stock from Buy to Neutral. This change comes after the company's shares experienced a significant increase due to rumors of an acquisition by IBM (NYSE:IBM). The shares of HashiCorp surged 19% on Tuesday, outperforming the Nasdaq's 1.6% gain, following reports that IBM was nearing a deal to purchase the software firm.
The analyst from BTIG remarked on the downgrade, stating that the current valuation reflects a balanced risk-reward scenario in light of the stock's recent performance, which was fueled by merger and acquisition speculation. HashiCorp, recognized for its robust product capabilities, is seen as a valuable strategic asset, and the potential synergies from a deal with a large acquirer like IBM could be substantial.
HashiCorp's stock is now trading at just over 7.5 times its calendar year 2025 estimated enterprise value to sales ratio. This is in contrast to similar market transactions, which typically suggest a takeover value at around 8.0 times the next twelve months' sales. The BTIG analyst pointed out that despite the merits of a potential acquisition, there remains some uncertainty regarding the completion of the deal.
Furthermore, with the usual approval and closing process for such transactions taking between six to nine months, the analyst foresees limited near-term upside for HashiCorp's shares. Consequently, the firm has adopted a more conservative Neutral rating for HashiCorp's stock at this juncture.
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