On Tuesday, DA Davidson analysts upgraded Clearwater Analytics Holdings (NYSE:CWAN) stock rating from Neutral to Buy. The adjustment comes in the wake of a proposed merger with Enfusion (NYSE:ENFN), which the analysts believe is highly strategic and could significantly accelerate Clearwater's technological advancements.
The firm's optimism about the upgrade is twofold. Firstly, the merger with Enfusion is expected to fast-track Clearwater's technology roadmap by several years, an important factor in the analyst's decision. Secondly, the recent dip in Clearwater's share price is seen as an opportunity, presenting what the analysts consider a more compelling risk/reward profile for potential investors.
However, the reduction in the price target to $32 reflects heightened risks associated with the merger. Despite the decrease, this new target is indicative of an enterprise value that is 34 times DA Davidson's preliminary pro forma 2026 estimate for Clearwater's adjusted EBITDA, which is projected to be between $280M and $290M.
The strategic rationale behind the merger, according to the analysts, is that it is likely to provide Clearwater with a technological edge, propelling the company forward. This anticipated progress underpins the analyst's confidence in the company's future performance.
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