Morgan Stanley on Clearwater Analytics Holdings (CWAN): 'We conducted a theoretical LBO exercise which supports ~20% IRR at our $27 PT'

Morgan Stanley analyst Michael Infante reiterated an Overweight rating and $27.00 price target on Clearwater Analytics Holdings (NYSE: CWAN).

The analyst comments "What happened? On November 12th, Bloomberg reported (see article here) that CWAN was weighing a sale after receiving takeover interest, with a potential deal being consummated within "a few weeks." Then, on November 17th, Reuters reported (see article here) that Thoma Bravo has also offered to buy CWAN. While CWAN has not commented directly on the rumors, representatives of its management team have subsequently conducted fireside chats at two competitor conferences on November 18th and November 19th, noting that the company's financial profile has consistently attracted "lots of interest." We have no knowledge of any transactions. Theoretical LBO analysis points to a ~20% IRR at our $27 price target when assuming revenue growth decelerates to low double-digits and a ~25x exit multiple. We sensitize take-out premium %, exit multiple, and leverage multiples and assume that purchase consideration is ~80% equity / 20% debt (SOFR+400bps at a 5x multiple on an average of '26 and '27 consensus EBITDA) at a $27 take-out price. From a top-line perspective, we use consensus '26 and '27 revenue and then conservatively assume that revenue growth decelerates by 200bps per year, reaching ~12% by '30, while terminal EBITDA margins ramp to 45%. We assume no cost savings and an exit multiple of ~25x (in-line with entry multiple) in '30."

For an analyst ratings summary and ratings history on Clearwater Analytics Holdings click here. For more ratings news on Clearwater Analytics Holdings click here.

Shares of Clearwater Analytics Holdings closed at $21.58 yesterday.

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