Investing.com -- Informatica (INFA) shares plunged 32% following weaker-than-expected Q4 2024 results and disappointing 2025 guidance, prompting multiple analyst downgrades.
Baird, Wells Fargo (NYSE:WFC), and RBC Capital all cut their ratings, citing execution issues, increased churn, and weaker renewals.
Baird downgraded Informatica to Neutral from Outperform, highlighting "weaker trends and reduced visibility."
The firm noted that the company’s "weaker renewals and higher (partial) churn" across both on-premise and cloud segments hurt its outlook. Cloud annual recurring revenue (ARR) growth, previously a key part of Baird’s bullish thesis, also took a hit.
"Lack of visibility due to multiple moving pieces reduces our confidence," Baird said.
Wells Fargo also cut Informatica to Equal Weight and slashed its price target to $19 from $34, citing concerns over ARR growth, higher churn, and shorter contract renewals.
"The most concerning metric where there is no quick fix is the decline in renewal rates due to an increase in churn," analysts wrote. Churn increased by two percentage points for both cloud and self-managed products, raising fears about long-term customer retention.
Another issue flagged by Wells Fargo was the trend toward shorter contract lengths, which the firm believes could indicate customers are considering alternative solutions.
"Even if they do migrate to the cloud, customers are turning off workloads and using credits, both of which negatively impact ARR near term," the analysts noted.
RBC Capital downgraded Informatica to Sector Perform from Outperform and cut its price target to $19 from $35, calling the quarter "messy and confusing."
The bank’s analysts pointed to sales execution issues in cloud renewals and warned that it could take "multiple quarters of improved execution to regain investor confidence."
“We don't see much downside with shares at 11x CY/25 uFCF, but think the stock will be range-bound for the medium-term as we search for catalysts,” said RBC.
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