On Monday, Needham adjusted its outlook on Freshworks Inc (NASDAQ: NASDAQ:FRSH) shares, reducing the price target to $20 from the previous $30 while maintaining a Buy rating.
The revision follows a series of investor meetings held last week in New York City with Freshworks CFO Tyler Sloat and Head of IR Joon Huh.
The discussions left analysts feeling more positive about the company's potential to quickly overcome first-quarter obstacles and enhance return on investment (ROI) throughout the rest of the year.
The meetings highlighted several strategic changes at Freshworks, including a shift in their product-led growth (PLG) strategy and product offerings for small and medium-sized business (SMB) customer experience (CX) clients.
Freshworks is now encouraging a simpler deployment of Freshdesk rather than pushing for a comprehensive Customer Success (CCS) platform deployment. This move is anticipated to streamline the customer onboarding process.
Additionally, the acquisition of Device42 was presented as a solid competitive move. Freshworks expects this acquisition to strengthen its position in the market. With new leadership at the helm, the company also anticipates improved sales execution.
The potential for expanding artificial intelligence (AI) penetration was another focal point of the discussions. Freshworks is developing a "Flowless Bot Builder" module, which is expected to be released at a later date.
This new module is currently under development and is seen as an opportunity to further enhance the company's product suite.
In summary, while the updated guidance from Freshworks is considered by Needham to be largely de-risked, successful sales execution in the second half of the year is deemed crucial to meet the company's financial targets.
InvestingPro Insights
As Freshworks Inc (NASDAQ: FRSH) navigates through its strategic changes and market positioning, real-time data from InvestingPro offers additional insights. With a market capitalization of $4.08 billion, the company holds a substantial presence in the industry. Despite a negative P/E ratio of -36.65, reflecting its current lack of profitability, the company boasts an impressive gross profit margin of 83.33% over the last twelve months as of Q1 2024. This indicates a strong ability to control costs relative to revenue.
From an investment standpoint, Freshworks is exhibiting signs that may interest potential investors. According to InvestingPro Tips, the company holds more cash than debt on its balance sheet, suggesting financial stability. Moreover, net income is expected to grow this year, which could signal a turning point for the company's profitability. For those considering an investment in Freshworks, it's worth noting that analysts have revised their earnings upwards for the upcoming period, indicating a positive sentiment around the company's future performance.
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