Why Is HashiCorp (HCP) Stock Soaring Today
What Happened:
Shares of cloud infrastructure automation platform HashiCorp jumped 12.7% in the morning session after Morgan Stanley upgraded the stock's rating from Equal Weight (Hold) to Overweight (Buy) and raised the price target from $23 to $30. The new price target implied a potential 20% upside from where shares traded when the upgrade was announced. The analyst added, "We believe a resurgence in cloud initiatives is translating to better demand for HashiCorp after a difficult FY24, and expect stronger bookings performance in FY25 will allow the company to reassert 20%+ revenue growth in FY25 and beyond."
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What is the market telling us:
HashiCorp's shares are very volatile and over the last year have had 21 moves greater than 5%. But moves this big are very rare even for HashiCorp and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 9 months ago, when the stock dropped 25.6% on the news that the company reported first quarter results that beat analysts' revenue, remaining performance obligations (RPO, a leading indicator of revenue), and earnings per share (EPS) estimates. Cash position improved with operating cash flow at nearly breakeven. However guidance was weak and a major driver of the stock move. Revenue guidance for the next quarter missed Consensus. The full-year guidance was lowered, which is never a good sign and could imply company-specific challenges or lack of visibility around near-term fundamentals. Non-GAAP operating loss guidance was roughly inline. Management highlighted a weaker macro environment and " pressure in the buying process." HashiCorp also announced cost-saving measures and a headcount reduction of about 8%. Overall, it was a fine quarter for the company but underwhelming guidance was the focus.
HashiCorp is up 8.4% since the beginning of the year, but at $24.79 per share it is still trading 30.2% below its 52-week high of $35.49 from June 2023. Investors who bought $1,000 worth of HashiCorp's shares at the IPO in December 2021 would now be looking at an investment worth $290.87.
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