On Thursday, Canaccord Genuity adjusted its outlook on Smartsheet Inc . (NYSE:SMAR) shares, raising the price target to $52 from the previous $45, while reiterating a Buy rating for the company's stock. The revision reflects a positive response to the company's current initiatives and financial strategies.
The upgrade was influenced by several factors, including Smartsheet's stable core business performance, its effective cost management leading to notable operating leverage, and the initiation of a new $150 million stock buyback program that is expected to be completed by the end of the year.
The firm's introduction of a new pricing model, which is anticipated to contribute to growth over time, further bolstered the analyst's confidence.
Smartsheet's ongoing efforts include the implementation of promising initiatives such as the recruitment of new sales leadership, gaining early traction with artificial intelligence, expanding capabilities and advanced functionalities, and enhancing the self-directed buying experience for customers. These strategic moves are seen as catalysts for the company's sustained growth and market position.
The price target increase comes after shares of Smartsheet showed a significant rise of approximately 13% in after-hours trading, which positions the stock at around 4 times enterprise value to revenue (EV/R) and 20 times enterprise value to free cash flow (EV/FCF) based on the updated Calendar Year 2025 estimates. This valuation is considered reasonable by the firm for a company of Smartsheet's scale and financial outlook.
In the view of Canaccord Genuity, although Smartsheet may not be the most prominent company in its sector, it stands out as the largest and one of the most predictable, with a valuation that is attractive relative to its operational metrics. This justifies the maintained Buy rating on the company's shares.
In other recent news, Smartsheet reported a robust start to the fiscal year with a 20% increase in total revenue, reaching $263 million in the first quarter. The company's adjusted earnings per share were $0.32, exceeding analyst expectations of $0.27.
Smartsheet's subscription revenue also saw a 21% increase year-over-year, reaching $249.1 million. The number of customers with annualized recurring revenue over $1 million grew by 50%, now standing at 72.
In terms of future financial outlook, Smartsheet anticipates total revenue for the second quarter to be between $273 million and $275 million, with non-GAAP operating income projected between $38 million and $40 million. For the full fiscal year, the company expects total revenue to range from $1.116 billion to $1.121 billion.
Smartsheet also announced the launch of a share repurchase program, authorizing the buyback of up to $150 million of its Class A common stock. These are among the recent developments for Smartsheet.
InvestingPro Insights
Following Canaccord Genuity's optimistic outlook on Smartsheet Inc. (NYSE:SMAR), InvestingPro data complements this perspective with key financial metrics. Smartsheet's market capitalization stands at $5.2 billion, and while the company's current P/E ratio is negative at -48.51, reflecting its lack of profitability over the last twelve months, analysts expect a turnaround with net income growth projected for this year. The company's impressive gross profit margin, which was last reported at 80.54%, indicates strong profitability at the core operational level.
InvestingPro Tips highlight that Smartsheet holds more cash than debt, providing financial stability, and that 15 analysts have revised their earnings estimates upwards, signaling confidence in the company's future performance. Additionally, the firm is trading near its 52-week low, which may present a buying opportunity for investors. For those considering a deeper analysis, InvestingPro offers many more tips, and by using the coupon code PRONEWS24, readers can receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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