Clearwater Analytics' (CWAN) purchase of Enfusion (ENFN) is a major step in creating a comprehensive "front-to-back" investment management software provider, Morgan Stanley said in a note Friday.

Management's projected synergy targets do not fully reflect higher gross margins or revenue synergies, which could generate mid-single-digit earnings per share accretion in 2026 and potentially low-double-digit accretion in 2027, the investment firm said.

By integrating Enfusion's front-office capabilities, Clearwater Analytics aims to serve more hedge funds, asset managers, and insurance clients at scale, Morgan Stanley said.

There is a sizable cross-selling opportunity among Clearwater Analytics' 200 asset management clients and 600 insurance customers, which could further support EPS, the analysts at Morgan Stanley noted.

Concerns include integrating Enfusion's technology for larger clients and scaling the platform for mega-cap accounts, the note added.

Morgan Stanley upgraded Clearwater to overweight from equalweight and raised price target to $34 from $30. Shares were up about 4% in recent trading.

Price: 28.07, Change: +0.98, Percent Change: +3.62