HashiCorp (NASDAQ:HCP) shares rose in premarket trading on Monday as investment firm Needham upgraded the software company to buy, citing several reasons, including “conservative” growth estimates.
Analyst Alex Henderson raised his rating on HashiCorp (HCP) shares to buy from hold, noting that in addition to the conservative estimates, it’s likely that the stock’s valuation is near a trough, its margin leverage is underestimate and the continued adoption of the cloud.
“In an environment where misses and estimate revisions are likely to produce outsized stock pressure, we think [HashiCorp] has many ways to produce upside to forecasts,” Henderson wrote in a note to clients.
Delving deeper, Henderson wrote that HashiCorp (HCP) has seen less “pronounced headwinds” to its business, as net recurring revenue is greater than 134% for three consecutive players and it exited the calendar third-quarter with a record pipeline.
Additionally, the time to conversion from open-source to paid customers is expected to decline in fiscal 2024, which could “help to offset macro pressures,” Henderson added.
The analyst also noted that HashiCorp’s (HCP) proprietary configuration language was the fastest programming language in 2022, growing 56% in 2022, topping other languages such as Rust, Go and Python.
HashiCorp (HCP) was recently mentioned as a takeout target by private equity by Morgan Stanley.
Analysts are largely bullish on HashiCorp (HCP). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha’s quant system, which consistently beats the market, rates HCP a HOLD.