On Wednesday, KeyBanc Capital Markets initiated coverage on Smartsheet Inc . (NYSE:SMAR) with a Sector Weight rating. The firm highlighted Smartsheet's position relative to its peers in the collaboration software space, noting its performance and growth metrics.
Over the past year, Smartsheet's stock has declined by approximately 18%, contrasting with the performance of its competitors Monday.com and Asana, which saw movements of roughly 68% increase and 27% decrease, respectively.
Smartsheet's financial growth in Fiscal Year 2024 was described as solid, with a 25.0% increase that surpassed both consensus estimates and the company's own guidance by 60 basis points (bps) and 30 bps, respectively.
Despite this, the company's newly issued guidance suggests an 8.6% deceleration in growth at the midpoint. This deceleration rate is less than that of Monday.com, yet Smartsheet's growth remains about 10% lower than Monday.com's and approximately 6.2% higher than Asana's.
The report also touched on the strategic moves within the industry, noting that both Monday.com and Asana are focusing on capturing larger clients through cross-functional and departmental deployments.
This shift is expected to heighten the competition within the market segment. Furthermore, Smartsheet's path to cash flow profitability was acknowledged, having achieved this milestone quicker than Asana but not as rapidly as Monday.com, and at a lower absolute value.
KeyBanc concluded its commentary by reflecting on the implications of these factors for Smartsheet's valuation. The combination of Smartsheet's top-line growth outlook and its comparative performance in reaching cash flow profitability were seen as challenging factors for justifying a premium valuation for the company's stock.
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