Analyst Asserts HashiCorp as a Solid Entry Point Post-Guidance Adjustment and Macro Turbulence

Oppenheimer analyst Ittai Kidron reiterated HashiCorp Inc HCP with an Outperform and a $42 price target.

HashiCorp reported a mixed 1Q FY24, beating estimates but issuing a weak outlook. 

The macro-environment finally caught up with HashiCorp as the uncertain outlook (further exacerbated by SVB Financial Group SIVBQ) drove longer sales cycles and a pullback in customer spending. 

In response, the company announced an 8% reduction in the workforce and changed to Go-To-Market (GTM) leadership. While investors could interpret these moves as signs of execution problems, he saw the issues as temporary. 

An 8% workforce downsizing and lowered FY24 revenue guidance offer downside protection and likely fully reflect the headwinds while leaving room for upside if conditions improve. 

The analyst remains positive behind his belief that HashiCorp is a mission-critical vendor positioned to benefit from a generational shift to the cloud. 

He views the after-hours selloff as a buying opportunity.

Needham analyst Alex Henderson maintains HashiCorp with a Buy and lowers the price target from $39 to $34.

Hashi was disappointed, but not catastrophic, just macro turbulence. 

Management acknowledged that macro pressure on deals has been more challenging than the environment they expected. As a result, they are taking an 8% downsizing, which should help margins as the second half progresses. 

While Henderson was disappointed and lowered estimates, he remains convinced the technology is foundational. 

The analyst thinks it will take a couple more quarters to play through, but he looked for growth to reaccelerate in the longer term. Hashi's new guidance looks conservative. 

Henderson thinks the company will be able to manage across the next several quarters, and the stock pressure sets up a solid entry point. 

It may take a few quarters from here to recover, but he thinks HCP shares will prove oversold at the post-close price. HashiCorp's session volume surged to 7.6 million versus the 100-day average of 1.5 million.

Price Action: HCP shares traded lower by 24.90% at $26.13 on the last check Thursday.

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