Welcome to Canaccord Genuity’s Richard Davis (Track Record & Ratings) and RBC Capital’s Ross MacMillan (Track Record & Ratings). In other words the #1 and #2 analysts on TipRanks. This is out of over 5,100 tracked analysts. The ranking is based on 1) success rate 2) average return per rating and 3) the statistical significance of those ratings i.e. how many ratings the analyst made.
This matters because analysts with the best track records are more likely to be successful with their current stock ratings.
So why are these two top-performing Street experts so bullish on Smartsheet Inc (SMAR– Research Report) right now?
A Very Strong Quarter
SMAR has just reported a very strong quarter, with strength across billings, revenue, earnings and cashflow. With expectations easily exceeded, SMAR shares surged 8% post-report.
Most notably, calculated billings accelerated 14pp from F2Q19 to +69% Y/Y. Billings grew 5% sequentially despite management’s expectations for a seasonal decline as seen in F3Q18. Further, the company set guidance for Q4 above the Street.
“Big billings acceleration surprise” is how RBC Capital’s Ross MacMillan described the quarter. He is now feeling ‘very encouraged’, and reiterated his Buy rating on December 4. This came with a $34 price target (29% upside potential).
MacMillan’s Outperform rating is based on the following key factors:
- The unstructured work automation market is very large, and Smartsheet has a flexible platform to address thousands of use cases. Not only that but its platform can also co-exist with personal productivity and collaboration applications.
- With 650K paid users today, Hedberg believes the company is scratching the surface of the opportunity when compared with the >200M paid commercial Office users and ~865M knowledge workers globally. If the company achieved 10% penetration of commercial Office users globally, it could generate $3–4B in annual recurring revenue.
- Very strong unit economics, with a calculated LTV/CAC >7x, subscription GMs >87%, and net dollar retention rates >130%
TipRanks No. 1 Analyst
The company has just held two big events: an analyst day and a user conference. Canaccord Genuity’s Richard Davis has been at both. “Our offline conversations with customers at the firm’s user conference, bolstered by presentations at the firm’s analyst day leads us to conclude that a BUY rating is still the appropriate rating” he writes.
Net-net this is “a best-in-class company in terms of the key foundational metrics” which now has a $1 billion revenue target in 4-6 years. And what about the valuation? Davis has an answer ready: when growth software stocks are at the foothills of a large TAM opportunity the stocks almost always work. And in this case the probability that Smartsheet executes well for several more quarters, if not years, is high enough to warrant a bullish outlook.
As a result, he’s betting on SMAR with a $35 price target, indicating shares could soar over 47%.
A Full House
Indeed, the stock has scored only Buy ratings from top analysts. This is with a $35 average price target (34% upside potential).
Jefferies’ John Difucci describes Smartsheet as an “early leader in an immense opportunity enabling a broader user base to harness the power of technology, essentially providing an application development platform for white collar workers.”
Enjoy Research Reports on the Stocks in this Article:
Smartsheet Inc (SMAR) Research Report
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