Clearwater Analytics Gains As Investors Eye Growth Beyond Acquisition Jitters
Goldman Sachs analyst Gabriela Borges upgraded Clearwater Analytics Holdings (NYSE:CWAN) rating to Buy from Neutral with a price forecast of $27 on Monday.
Borges said the stock's 30% drop over the past six months, compared with a 9% Nasdaq gain, reflects investor concerns over the quality of acquired assets and Clearwater's ability to integrate multiple acquisitions simultaneously.She argued those risks are now priced in and sees a clear catalyst path, including the September 3 Analyst Day.
Borges expects Clearwater's core business to sustain 20%-plus annual growth over the next three to five years, driven by its automation platform, strong network effects, and cross-sell opportunities.
She said Clearwater's net revenue retention (NRR) is already improving, with potential upside from cross-sell as the company releases about five new products annually, targeting growth in alternative investments through partnerships with Blackstone (NYSE:BX) and PIMCO.
She added that macro tailwinds could further boost results. Goldman projects three consecutive 25-basis-point rate cuts starting in September, which would lift fixed-income asset prices, about 80% of Clearwater's client AUM, and support revenue through its AUM-linked pricing model.
Increased capital market activity and IPO volume could also add one to two percentage points of growth in the corporate segment, which accounts for about 16% of revenue.
Borges acknowledged investor concerns about acquisition execution, citing mixed results with past deals and the challenge of integrating Enfusion, representing about 13% of run-rate sales.
Still, she forecasts Enfusion's growth improving from 13% to 15% by 2027, short of management's 20% target, but believes Clearwater can still achieve total business growth of 19%.
She noted Enfusion's recent momentum, including a record-high bookings quarter and 49 new client wins in the second quarter.
Longer term, Borges is constructive on Clearwater's plan to build an end-to-end platform with a single security master and data plane for institutional investors, capable of providing a complete, real-time portfolio view across public and private markets.
She believes the market underestimates the combined platform's ability to reach a Rule of 40 profile, even before the vision is fully realized.
Price Action: CWAN shares traded higher by 3.55% to $19.11 at last check Tuesday.
Photo via Shutterstock
Latest Ratings for CWAN
Date
Firm
Action
From
To
Mar 2022
Morgan Stanley
Maintains
Equal-Weight
Mar 2022
Credit Suisse
Maintains
Outperform
Mar 2022
RBC Capital
Maintains
Outperform
View More Analyst Ratings for CWAN
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This article Clearwater Analytics Gains As Investors Eye Growth Beyond Acquisition Jitters originally appeared on Benzinga.com
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