Freshworks (FRSH – Research Report), the Technology sector company, was revisited by a Wall Street analyst today. Analyst Michael Berg from Wells Fargo maintained a Sell rating on the stock and has a $13.00 price target.
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Michael Berg’s rating is based on a combination of factors that suggest Freshworks is facing significant challenges. Firstly, the company is undergoing organizational changes which are expected to impact its market share, with the possibility of losing ground to competitors. The guidance for fiscal year 2025 does not appear to be sufficiently risk-adjusted, indicating a potential lack of growth momentum.
Furthermore, the company’s strategic shift in focus within the IT service management sector is perceived as a double-edged sword. While moving towards a high-growth area, the increased competition and underinvestment in research and development may result in customer churn and difficulties in cross-selling. Moreover, mixed feedback from partners and a concerning outlook on customer service demand add to the uncertainty. Given these considerations, the stock’s current valuation appears high, prompting a Sell recommendation.