Intapp (NASDAQ: INTA) appears to be nearing an attractive valuation, and investors may want to consider adding the stock to their watchlist.
Since June last year, the stock price has fallen considerably from $48 to $31, prompting a reevaluation of its investment standing.
Analysis of Recent Performance and Market Trends
Intapp has reported a slowdown in revenue growth, decreasing from 27.7% in the first quarter of 2024 to 22.7% in the second quarter.
Despite this decrease in revenue growth, the company’s cloud annual recurring revenue (ARR) grew by an impressive 33.5% year over year, indicating strong underlying business fundamentals.
This growth contrasts with the overall blended ARR growth of 21.1% year-over-year for the same period. These metrics suggest that while overall growth has slowed, specific areas of the business, particularly in cloud services, remain strong.
Expansion and Addressable Market Potential
Intapp’s market opportunity has significantly expanded, with the total addressable market (TAM) now estimated at $31 billion, as reported during Intapp Investor Day 2024.
A key growth driver for Intapp is its generative AI (GenAI) capabilities, which have been integrated into its DealCloud platform.
This integration is expected to enhance customer value through efficiencies such as reduced manual data entry and improved data analysis and workflow automation.
Financial Performance and Valuation
Intapp’s operational efficiency and profitability are on an upward trajectory, with management targeting an annual operating margin expansion of 300-500 basis points.
The company’s focus on profitability is expected to be a critical factor in its valuation re-rating.
Despite historical high growth rates, Intapp’s EBIT to free cash flow (FCF) conversion has been aligned with industry standards, and a conservative estimate suggests a future growth potential, supporting a higher market valuation of $3 billion or $41.76 per share, indicating a 33% upside potential.
Acquisition and Innovation as Growth Catalysts
Recently, Intapp acquired delphai, a Berlin-based AI company specializing in data automation and intelligence.
This strategic acquisition is poised to accelerate Intapp’s AI capabilities and support its strategic growth in the GenAI space.
The focus on AI-driven product enhancements is likely to bolster Intapp’s competitive edge and market share, particularly given the strong adoption rates and customer satisfaction levels already evident from its improved win rates.
Market Risks and Growth Projections
Despite the positive outlook, there are risks associated with the potential overestimation of growth prospects, especially with management indicating a possible slowdown in the FY24 forecast.
If Intapp’s growth decelerates further than anticipated, it could place additional pressure on its valuation. Investors would be prudent to keep a close eye on Intapp’s growth.
Investment Recommendation
While 2024 may see a possible slowdown in 2024, the current valuation is attractive.
With a larger addressable market, a strong focus on high-margin GenAI products, and solid financial management, Intapp is well-positioned to capitalize on its strategic initiatives.
Investors are encouraged to consider the improved valuation and potential for sustained growth before making any investment decisions.
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I’m Jackson Hartwell, a writer who specializes in dissecting current business events. I’m dedicated to providing you with clear and concise insights into the world of politics, making it easier to understand the latest news and developments.