Informatica (INFA – Research Report), the Technology sector company, was revisited by a Wall Street analyst today. Analyst Kash Rangan from Goldman Sachs downgraded the rating on the stock to a Hold and gave it a $20.00 price target.
Kash Rangan has given his Hold rating due to a combination of factors affecting Informatica’s transition to cloud services. The company has not met expectations in terms of revenue and annual recurring revenue (ARR) growth, which were central to the previous Buy thesis. Despite initial optimism, the cloud transition is progressing slower than anticipated, with projected cloud ARR growth for the fiscal year 2025 falling below both Goldman Sachs’ estimates and the company’s earlier guidance.
Informatica is also facing challenges with higher churn rates in its cloud and self-managed maintenance ARR, partly due to weaker renewal efforts. Customers are favoring shorter self-managed contracts, which could hinder revenue growth. Although the shift from maintenance to cloud has potential long-term benefits, it has led to a short-term decline in new net ARR due to accounting practices on subscription credits. These factors collectively contribute to a significant decrease in revenue and free cash flow growth, prompting Rangan to adopt a more cautious stance until operational performance shows improvement.
According to TipRanks, Rangan is a 5-star analyst with an average return of 11.3% and a 60.00% success rate. Rangan covers the Technology sector, focusing on stocks such as Salesforce, Microsoft, and Workday.
In another report released today, RBC Capital also downgraded the stock to a Hold with a $19.00 price target.