Monday, BMO Capital adjusted its outlook on Smartsheet Inc . (NYSE: NYSE:SMAR), reducing the price target to $42 from the previous $48, while still maintaining an Outperform rating on the company's shares. The adjustment follows Smartsheet's latest earnings report, which revealed a slower than anticipated growth forecast for the fiscal year 2025.
The company's recent financial results showed a slight outperformance in billings and revenues for the January quarter. However, the forecast for annual recurring revenue (ARR) for FY25 suggested a significant slowdown in growth, contrary to what was expected by analysts. The management at Smartsheet has taken a more conservative approach in their guidance this year, despite expressing optimism about the upcoming fiscal year's product launches, including a revamped user interface.
BMO's revised price target reflects the anticipated deceleration in growth, which the firm believes could restrict the potential for an increase in the company's stock valuation multiples. Despite the reduction in the price target, BMO continues to see the valuation of Smartsheet as attractive, which supports the decision to maintain the Outperform rating.
The analyst's comments highlight that while the new product releases in FY25, such as the updated user interface, provide reasons for optimism, the expected decline in growth rate may dampen the opportunity for the company's stock valuation to expand further. This outlook has led to the revised price target of $42, yet the firm's positive stance on the stock remains unchanged.
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