Freshworks is the IBD Stock of the Day for Tuesday, as FRSH stock approaches a buy point from a cup-with-handle base. FRSH stock has gained more than 40% this year.
Freshworks is an enterprise software company with offerings such as IT services management and customer resource management software. It competes with giants such as Salesforce and ServiceNow, among others. The San Mateo, Calif.-based company reported its first adjusted operating profit in the first quarter of this year.
On the stock market today, FRSH stock rose 3.5% to close at 21.24. Shares are nearing a 21.50 cup-with-handle buy point.
FRSH Stock: Earnings Growth
FRSH stock has gained about 17% since Freshworks' Oct. 31 third-quarter earnings report. The company reported adjusted earnings of 8 cents per share and sales of $154 million, exceeding analyst expectations for both numbers. Earnings jumped from a one-cent loss for the same period last year, while sales grew 19%.
"We think 3Q results reflect FRSH's resiliency in the face of a tough macro and its continued execution on its more profitable growth strategy," Barclays analyst Ryan MacWilliams said in a note to clients following the report. He holds a neutral equal-weight rating for the stock.
For the full year, analysts expect Freshworks to post adjusted earnings of 24 cents per share, compared with an adjusted 7-cent loss last year. Further, revenue is expected to grow 20% to $595 million.
In the first quarter, Freshworks reported an adjusted operating profit of $3.9 million, its first operating profit as a public company.
AI Offerings
Freshworks held its initial public offering in 2021, as the company took aim at business software markets worth $120 billion total, as it noted in its prospectus. The firm has more than 60,000 customers globally.
Freshworks debuted at a $10 billion valuation in September 2021 and is now worth about $6 billion. Recently, the company has been expanding its services focused on artificial intelligence. In June, Freshworks announced upgrades to its Freddy AI software that integrates generative artificial intelligence to help with a range of business tasks.
"Our goal at Freshworks is to put the power of generative AI in the hands of the Fortune five million, not just the Fortune 500 enterprise," founder and Chief Executive Girish Mathrubootham said in the June news release.
Cup-With-Handle Pattern
While FRSH stock has a 21.50 buy point out of a cup with handle, investors could also use a downward-sloping trendline in the base's handle as an early buy point at 21.04, which is Tuesday's intraday high.
Freshworks is part of the MarketSmith Computer Software-Enterprise industry group. The 127 stocks in that group have gained a cumulative 22% this year, ranking 43 out of 197 industry groups.
Meanwhile, FRSH stock has an IBD Composite Rating of 90 out of a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating — with the best growth stocks scoring above 90.
Further, FRSH has an IBD Relative Strength Rating of 87 out of 99. The Relative Strength Rating shows how a stock's price performance stacks up against all other stocks over the last 52 weeks. The best growth stocks typically have RS Ratings of at least 80.
FRSH is also on the IBD Tech Leaders list.
