On Monday, Morgan Stanley upgraded shares of HashiCorp Inc (NASDAQ: NASDAQ:HCP) from Equal-weight to Overweight, also increasing the price target to $30 from $23. The adjustment comes as industry conversations indicate an improvement in the cloud demand environment, which is seen as beneficial for HashiCorp's business.
"We think risk-reward now skews attractive given an improving cloud demand backdrop", Morgan Stanley analyst says.
HashiCorp, known for its tools that help accelerate and secure cloud application delivery, is expected to see a turnaround in its cRPO bookings as early as the fourth quarter, with a continuation of growth throughout FY25. This is anticipated to lead to a 20% revenue increase in FY26 and the years to follow.
The optimism surrounding HashiCorp is tempered by ongoing long-term debates about the company's monetization strategies and competitive landscape.
The new price target of $30 is based on a multiple of 6.7 times CY25 sales, adjusted for growth, which is in line with peers such as Cloudflare (NYSE:NET), trading at a similar multiple. This upgrade reflects Morgan Stanley's confidence in HashiCorp's future performance in the cloud sector.
InvestingPro Insights
Recent analysis from InvestingPro reveals some key financial insights into HashiCorp Inc (NASDAQ: HCP) that investors should consider. The company holds a strong position with a market capitalization of $4.33 billion, suggesting a significant presence in its sector. HashiCorp's impressive gross profit margin stands at 81.42% for the last twelve months as of Q3 2024, indicating efficient operations and a robust business model. This aligns with the positive sentiment from Morgan Stanley regarding the company's potential growth.
However, it's worth noting that HashiCorp's P/E ratio is negative at -19.52, reflecting that the company is not currently profitable. This is further supported by the fact that analysts do not expect HashiCorp to be profitable this year. Despite this, the company's liquid assets exceed short-term obligations, showcasing financial resilience which could support its growth trajectory as cloud demand improves.
Investors seeking more in-depth analysis can find additional InvestingPro Tips for HashiCorp, such as the company's cash to debt ratio and dividend policies, on the dedicated page at InvestingPro. There are 6 more tips available that could provide further guidance on the potential investment opportunity. For those interested in a yearly or biyearly Pro and Pro+ subscription, use the coupon code PRONEWS24 to get an additional 10% off.
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