On Monday, Morgan Stanley (NYSE:MS) upgraded Amplitude Inc (NASDAQ:AMPL) stock rating from Underweight to Equalweight and raised its price target to $11.00 from the previous $10.00. The decision follows Amplitude's adjusted revenue growth projections and a significant share price decline relative to the software sector over the past year. According to InvestingPro data, the stock has seen a 26.5% surge over the past six months despite recent volatility, with the company maintaining a healthy balance sheet with more cash than debt.
The firm acknowledged the challenges faced by Amplitude, noting a decrease in revenue growth to approximately 8% for FY24, down from 16% in FY23. Despite this slowdown, Morgan Stanley sees positive signs, including stability in key performance indicators (KPIs) which suggests that the company may have effectively navigated macroeconomic headwinds.
InvestingPro analysis shows the company maintains a strong gross profit margin of 74.2% and analysts expect profitability this year. Get access to 8 more exclusive InvestingPro Tips and comprehensive financial analysis through the Pro Research Report.
Morgan Stanley also pointed to recent management changes at Amplitude as a potential catalyst for improved execution within the company. These changes, along with a valuation that now aligns more closely with its customer enablement peers, are believed to limit the downside risks for the stock.
The new price target of $11.00 represents an approximate 8% upside potential based on recent trading levels. The target is based on a 0.41x enterprise value to sales growth (EV/S/G) multiple, which is now largely consistent with the valuation of peers in the digital enablement and data infrastructure sectors. This adjustment in price target reflects Morgan Stanley's revised outlook on the company's financial performance and market position.
In other recent news, Amplitude, Inc. has reported a steady growth in its third-quarter revenue, reaching $75.2 million, a 6% increase from the previous year. The company's annual recurring revenue (ARR) has hit $298 million, with nearly 3,500 paying customers, 567 of which contribute over $100,000 in ARR. Despite facing macroeconomic challenges and new Russian sanctions, Amplitude maintains an optimistic outlook, focusing on AI integration, product innovation, and targeting enterprise clients for further expansion.
The company has raised its full-year revenue outlook to between $297.1 million and $298.1 million. However, it expects an increase in operating losses due to the integration of Command AI and legal expenses. On the brighter side, the acquisition of Command AI is projected to drive customer synergies and potential revenue uplift between 20% to 50%.
In addition to these developments, Amplitude's recent product launches and its extended partnership with HubSpot (NYSE:HUBS) for integrated tracking have been well received. The company's commitment to scaling sales efficiency and aggressive push for product launches based on customer demands for consolidated analytics are key elements of their growth strategy. These recent developments indicate Amplitude's ongoing commitment to its strategic direction, emphasizing AI and product innovation as key growth drivers.
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