Clearwater Analytics' Enfusion Infusion Offers Compelling Value Proposition, Analyst Upgrades Stock

Piper Sandler analyst Arvind Ramnani upgraded the shares of Clearwater Analytics Holdings Inc CWAN from Neutral to Overweight and raised the price forecast from $28.00 to $36.00.

CWAN delivered strong fourth-quarter results, with revenue of $126.5 million, exceeding the Street’s forecast of $120.3 million, reflecting a 27.7% year-over-year increase compared to the Street’s expectation of 21.5% growth.

The analyst noted that CWAN’s fourth-quarter performance surpassed expectations in both revenue and margins. The 25% growth in ARR was driven by an NRR of 116%, reflecting a positive increase from the 114% NRR in the third quarter and ahead of the FY25 exit target of 115%.

Adjusted EBITDA also surpassed expectations, exceeding the $38.5 million estimate by $3.2 million, resulting in a 33.0% margin with $41.7 million for fourth-quarter FY24.

Non-GAAP EPS of $0.13 was slightly ahead of consensus, marking a $0.01 increase from the previous quarter and a $0.03 rise from the same period last year.

The Enfusion acquisition is expected to finalize in the second-quarter, at which point the analyst will adjust estimates to reflect the combined company’s performance.

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The analyst sees the merger of the companies presenting a strong value opportunity to increase wallet share with current clients and boost win rates with new prospects.

In the analyst’s opinion, the expanded range of services strengthens CWAN’s competitive edge, creates more cross-selling and upselling possibilities, and leads to cost synergies.

For FY25, the company provided revenue guidance of $535.5 million to $542 million (around 19%-20% year-over-year growth), compared to the Street’s projection of $533.3 million (+18.0% growth).

Annual adjusted EBITDA guidance was set at $182 million to $185 million (approximately a 34% margin), surpassing the consensus estimate of $180.2 million (33.8% margin).

Although Clearwater’s preliminary FY25 guidance slightly exceeds current consensus, the analyst views these initial projections as conservative.

The analyst’s raised $36 price forecast is based on 14x CY26 revenue estimate of $651 million (from 13x the analyst’s previous CY25 revenue estimate of $535 million).

Price Action: CWAN shares traded higher by 12% at $30.29 at last check Thursday.

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