Smartsheet Earnings: Macroeconomic Pressures Weigh on SMB Expansion, but Shares Are Attractive

Narrow-moat Smartsheet reported reasonable fourth-quarter and full-year fiscal 2024 results, with top-line growth marginally below our above-guidance forecast, but with profitability surprising to the upside. Smartsheet continues to achieve healthy traction in the sticky enterprise market, which supported the firm reaching $1 billion in annual recurring revenue during the fourth quarter. Following the result, we raise our fair value estimate to $56 per share from $53 due to the time value of money and a slight uptick in our long-term profitability assumptions. At current prices, Smartsheet shares screen as attractive for investors looking to own a quality software name at a sizable discount to our valuation. We believe investors have overreacted to near-term macroeconomic pressures already factored into our forecasts, with shares falling 10% in afterhours trading.