A promising opportunity has emerged for investors looking at Samsara’s stock, at least according to Piper Sandler. The firm’s analyst, James Fish, has lifted Samsara’s rating to “overweight” from “neutral,” setting a price target at $50. This marks a potential upside of 41.4% for the company known for its connectivity software utilized in dash cams and GPS fleet tracking.
Fish’s upgrade follows a significant decline in Samsara’s stock, which plummeted over 16% after the company issued its less-than-stellar revenue guidance for the first quarter. Currently, the stock has fallen around 19% since the beginning of the year.
“Our perspective has remained quite steady: Samsara embodies a high-quality and durable growth trajectory exceeding 20%. It is capturing more of the core fleet market, advancing into higher-end markets, and boasts substantial opportunities to cross-sell its offerings like Video Safety and Equipment Monitoring/Asset Tags,” Fish explained in his Sunday memo to clients. He further noted that over the past six months, lofty expectations were set for Samsara. However, following their fourth-quarter report, many have adjusted their outlooks, recognizing that achieving over 30% growth is unlikely, though Fish believes a 20% growth rate is well within reach over the coming years.
The general sluggishness affecting tech stocks might continue to impact Samsara, Fish acknowledges. Yet, he sees the stock as an attractive option now due to several factors. Samsara’s focus on operating budgets over IT budgets affords it better security in the current market climate. Additionally, the company’s annual “Beyond” conference in June has traditionally been a significant event for product launches, often serving as a catalyst for share price movement. Furthermore, Samsara’s valuation is now more compelling, returning to its normal premium relative to other growth assets.
“Having shown patience, we’re finally facing a more reasonable entry point with expectations realigned, and the business is positioned for upside in both sales and free cash flow, making the risk-reward scenario more appealing,” Fish remarked. While he concedes that the valuation might not be considered “dirt cheap,” he suggests that it’s a favorable moment for investors to gradually start building their positions.
He also highlighted that Samsara faces minimal direct competition, aside from a few private telematics firms since other service providers and automakers struggle to match Samsara’s advanced technology. “The market is highly fragmented, but over recent years, Samsara has pulled ahead, with competitors exiting or merging, which presents ample opportunities for gaining market share,” he added.
