On Monday, Oppenheimer revised its rating on Intapp, Inc (NASDAQ: INTA) stock, moving from Outperform to Perform. The downgrade comes as the firm removes its previous $42 price target for the company. The decision is influenced by several factors that the firm believes could impact Intapp's growth and business model efficiency.
The industry leader in purpose-built relationship management solutions is facing a number of challenges, according to the firm's analysis. There is a growing concern over the effectiveness of artificial intelligence (AI) and cyclical challenges within the category, which may lead to a slowdown in hiring for sales and account management roles. Additionally, the firm cites increased competition from major players such as Salesforce (NYSE:CRM) and Oracle (NYSE:ORCL), which offer similar services, as a potential hurdle for Intapp.
Oppenheimer also points to a less defensible moat in the era of AI for Intapp. This, combined with what is perceived as a well-understood story and a lack of near-term catalysts, could result in a slower growth trajectory for the company when compared to its small and mid-cap (SMiD-Cap) peers.
The firm's commentary suggests that these headwinds are likely to affect Intapp's valuation multiples. A growth slowdown and a business model that is less predictable and efficient are expected, which could lead to Intapp not meeting the Rule-of-40 threshold—a metric used in the software industry to gauge a company's performance by combining growth rate and profit margins.
Oppenheimer's outlook indicates that these factors will likely influence Intapp's performance in the foreseeable future, as the company navigates a competitive and evolving market landscape.
In other recent news, Intapp, the provider of AI-powered solutions for professional services firms, has been chosen by Argonaut Private Equity for employee compliance monitoring.
Intapp's software will automate Argonaut's oversight of personal trading activities, a move aimed at simplifying compliance and reducing time spent on manual processes. This development is part of Argonaut's commitment to leveraging technology to enhance its growth strategy and operational efficiency.
In financial news, Intapp reported robust growth in its fiscal third quarter of 2024. The company's cloud Annual Recurring Revenue (ARR) grew to $274.2 million, making up 72% of total ARR. Total revenue for the quarter was $110.6 million, a 20% increase year-over-year, while SaaS and support revenue saw a 22% rise to $80.8 million.
These recent developments were accompanied by strategic acquisitions, including Transform Data International (TDI), and the introduction of new generative AI capabilities. The company's partnerships with Microsoft (NASDAQ:MSFT) and KPMG have also contributed to revenue growth.
Looking ahead, Intapp projects Q4 SaaS and support revenue to be between $83.5 million and $84.5 million, and total revenue to range from $111 million to $112 million. For the full fiscal year 2024, the projections are $314.5 million to $315.5 million for SaaS and support revenue, and $427 million to $428 million for total revenue.
InvestingPro Insights
Amidst the challenges highlighted by Oppenheimer, recent data from InvestingPro shows a mixed financial landscape for Intapp, Inc (NASDAQ: INTA). With a market capitalization of $2.67 billion, the company's growth narrative is supported by a robust revenue increase of 23.81% over the last twelve months as of Q3 2024. This is further evidenced by a gross profit margin of 69.87%, reflecting a strong ability to monetize its offerings despite the competitive pressures.
An InvestingPro Tip suggests that Intapp's balance sheet strength is notable, as the company holds more cash than debt, providing financial flexibility in the current uncertain market environment. Additionally, the optimism among analysts is palpable, with 10 analysts having revised their earnings expectations upwards for the upcoming period, signaling confidence in Intapp's potential to navigate through the competitive headwinds and possibly achieve profitability within the year.
InvestingPro also notes that Intapp is trading at a high Price/Book multiple of 6.91, which may be a point of consideration for investors weighing the company's valuation against industry peers. With these insights, investors can delve deeper into Intapp's financial health and market position by exploring additional InvestingPro Tips. There are 5 more tips available, offering a comprehensive analysis of Intapp's outlook. For those interested, remember to use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and unlock the full spectrum of investment intelligence.
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