Wall Street starts coverage of cloud software provider ServiceTitan

Investing.com -- Several Wall Street initiated research coverage on ServiceTitan Inc (NASDAQ:TTAN ), a cloud-based software provider for trades businesses.

Analysts at Piper Sandler began the coverage on TTAN shares with an Overweight rating and a price target of $125.

The investment bank’s bullish outlook is rooted in several factors including ServiceTitan's leading position in a $1.5 trillion recession-resistant market, its current low penetration rate of approximately 6%, and the potential for significant profit growth over the next 5-7 years due to untapped operating leverage.

The firm also highlighted ServiceTitan's annual recurring revenue (ARR), which is expected to surpass $1 billion by the end of 2026.

“ The mission-driven culture instilled by the two co-founders that grew up with parents from the trades combined with a proven business model with consistently low-churn, and a durable replacement-driven end market warrants a premium valuation, in our view,” analysts led by Brent A. Bracelin said in a note.

Separately, Goldman Sachs analysts assigned TTAN a Neutral rating and a target price of $100.

The Wall Street giant recognized ServiceTitan's role in digitizing business workflows for field service trades and its potential to become a dominant vertical software-as-a-service (SaaS) business.

“Uniquely positioned to maintain market leadership amidst broader digitization of the industry, we are bullish on ServiceTitan’s potential to scale into a fortified vertical SaaS business generating $4-5bn in revenue and +25% operating margin,” Goldman analysts noted.

It also cited the company's sizable serviceable market, high customer retention rates, and the potential for increased digitization driven by private equity activity as key growth drivers.

However, Goldman Sachs sees a balanced risk-reward profile at the current valuation, with ServiceTitan's stock trading at 13x enterprise value (EV) to calendar year 2025 (CY25) sales, compared to the average of 10x for its competitors.

As of January 6, twelve investment firms have initiated research coverage on TTAN stock. Nine firms have given it a Buy rating, while three have started with a Neutral rating.

Source: Investing.com