On Monday, BMO Capital adjusted its outlook on Smartsheet Inc . (NYSE:SMAR), reducing the price target to $48 from $52 while maintaining an Outperform rating on the company's shares. The adjustment reflects a cautious stance on the company's fiscal year 2025 (FY25) billings and revenue projections, which are anticipated to decline.
Analysts at BMO Capital believe that Smartsheet is capable of surpassing the expected billings and revenues for the January quarter. They note that the company's valuation is appealing when considering the next twelve months' free cash flow (FCF) in relation to its growth multiples. This assessment is driven by the view that investors are showing heightened sensitivity to valuations in the current market environment.
Despite the positive near-term outlook, BMO Capital anticipates that consensus estimates for Smartsheet's FY25 billings and revenues may be overly optimistic and could be subject to downward revisions. The firm's analysts have expressed concerns about the future direction of these estimates, which have influenced the decision to reduce the price target.
The competitive landscape of the market segment in which Smartsheet operates also plays a role in BMO Capital's cautious approach. The long-term competitive nature of the market is a factor that the firm considers when evaluating the company's future performance and valuation.
In conclusion, while BMO Capital retains a favorable Outperform rating on Smartsheet, indicating confidence in the company's performance, the firm has moderated its expectations regarding the company's longer-term financial prospects by lowering the price target to $48. This new target reflects the balance between near-term potential and cautiousness about the company's performance in the forthcoming fiscal years.
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