Wolfe Research downgrades HashiCorp stock, believing there is limited upside after IBM acquisition

Wolfe Research revised its stance on HashiCorp Inc (NASDAQ: ) stock on Monday from an Outperform rating to a Peer Perform rating.The change in ratings is a direct response to the expected acquisition by HashiCorp International Business Machines Corporation (NYSE: ) and is expected to be completed by the end of 2024.

Wolfe Research noted that since the acquisition is already priced into HashiCorp's current share price, further upside potential is seen as lacking. The research firm noted that while an IBM acquisition is considered the most favorable outcome for HashiCorp shareholders, it is unlikely that any competing bid will emerge to exceed IBM's bid.

Analysts at the company believe completion of the deal is a likely event, barring any unforeseen circumstances. Wolfe Research highlighted that the main risk to HashiCorp stock is the acquisition's failure to gain shareholder approval.

Such events may have a negative impact on stock value. The company's comments indicate caution about HashiCorp's short-term stock performance given the impending acquisition.

Once completed, the acquisition will bring HashiCorp under IBM, a move currently seen as a strategic fit for the two companies. With expectations that the deal will close, Wolfe Research's latest rating reflects a current neutral stance on the stock's investment potential.

Investment Professional Insights

In light of Wolfe Research's recent rating change on HashiCorp Inc (NASDAQ:HCP), it's valuable to consider some key financial metrics and InvestingPro Tips that could impact the stock's performance. HashiCorp has a market capitalization of approximately $6.55 billion, and although a negative price-to-earnings ratio reflects a lack of profitability over the past 12 months, the company's gross margins are impressive at 81.46%. This financial strength is further underscored by the fact that HashiCorp holds more cash than debt on its balance sheet, giving it a stable footing toward an IBM acquisition.

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Investors should note the significant returns HashiCorp has experienced over different periods of time, with a return of 32.75% last week and a gain of 66.36% over the past six months. Despite these impressive returns, the company's stock is considered overbought territory according to the Relative Strength Index (RSI). This may signal the need for caution in the short term, especially in the context of upcoming acquisitions.

For those wishing to gain a deeper understanding of HashiCorp's financial health and performance, InvestingPro offers Extra tips, including analysis of whether analysts predict the company will be profitable this year, as well as insights into company valuation multiples.To access these insights and more, use coupon code PRONEWS24 Enjoy an additional 10% discount on annual or two-year Pro and Pro+ subscriptions at InvestingPro.

This article was generated with the support of artificial intelligence and reviewed by an editor. For more information, please see our terms and conditions.

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