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On Friday, RBC Capital maintained a Sector Perform rating on Smartsheet Inc . (NYSE: NYSE:), while reducing the price target to $36.00 from the previous $48.00. This adjustment comes after Smartsheet’s latest earnings report, which featured mixed results and led to an 11% decline in the company’s shares in after-hours trading.
The company’s revenue and billings marginally surpassed expectations. However, the initial fiscal year 2025 guidance provided by Smartsheet did not meet analyst projections. It suggested revenue would be 2% below consensus and indicated a significant slowdown in annual recurring revenue (ARR) growth to 14% year-over-year by the end of the year.
RBC Capital noted the guidance as conservative, a shift from the previous fiscal year when billings guidance showed limited potential for upside. The conservative outlook was attributed to several factors, including a buffer for the new sales leadership, further deterioration in the small and medium-sized business (SMB) segment, and minimal impact expected from new initiatives such as product-led growth (PLG), user experience revamp, and artificial intelligence enhancements.
Despite the subdued guidance, the report highlighted a silver lining with the improvement in Smartsheet’s profitability. RBC Capital emphasized that their long-term thesis remains unchanged. The firm believes that the intense competition within the industry continues to be a significant factor for maintaining the Sector Perform rating on Smartsheet’s stock.
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