On Wednesday, Goldman Sachs (NYSE:GS) adjusted its stance on Enfusion Inc (NYSE:ENFN), downgrading the stock from Neutral to Sell and setting a new price target of $8.00, a decrease from the previous target of $9.00. The investment bank's decision reflects a conservative outlook for the company's performance, anticipating a 14% downside compared to an 8% potential upside for their other covered stocks.
The analyst at Goldman Sachs noted that despite Enfusion's stock underperforming the NASDAQ by 54% over the past year, expectations for the company in 2024 are for it to be range-bound. The street's estimates suggest a 10-point acceleration in revenue over the next year, but Goldman Sachs projects a more modest 3-point increase. Their revenue forecast for 2025 also sits 5% below consensus.
Goldman Sachs' industry conversations indicate a stable, rather than improving, outlook for hedge funds. Against this background, any significant growth for Enfusion is anticipated to stem from company-specific advancements, such as gaining market share more rapidly within the hedge fund Total Addressable Market (TAM) or expanding into new areas.
The report also highlights the challenges Enfusion may face in converting larger funds and enhancing functionality, which could keep Customer Acquisition Costs (CAC) high over the next three years compared to historical levels.
The process of converting existing funds, seen as brownfield opportunities, is expected to be resource-intensive due to Enfusion's established dominance in landing new hedge funds, known as greenfield opportunities, and the high switching costs and resources required by existing funds.
Goldman Sachs plans to monitor the effectiveness of Enfusion's product improvements and market strategies closely before adopting a more positive view on the stock's growth potential.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.