Samsara stock: BofA initiates coverage with a Buy rating and $37 target

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on Jun 20, 2024
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  • BofA initiates 'Buy' rating with $37 target on Samsara.
  • Strong growth with Q1 revenue up 37.4% year-over-year.
  • Technical analysis: Stock has recently entered a bearish phase.

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In a notable move, Bank of America (BofA) initiated coverage on Samsara Inc (NYSE: IOT), assigning the company a Buy rating with a price target of $37.

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This comes as Samsara continues to carve out a niche in the rapidly evolving field of AI-driven auto safety solutions.

The San Francisco-based firm has garnered attention for its innovative approach, leveraging AI-powered dash cams and real-time driver coaching software to significantly reduce accidents by approximately 29%.

BofA’s analysts, led by Matt Bullock, underscored Samsara’s potential to disrupt the $19 billion vehicle telematics industry, citing its user-friendly solutions and robust feature set as key differentiators in capturing a growing share of the North American market.

Fundamental performance

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Samsara’s fundamental performance underscores its strong growth trajectory.

Recently released financial results for Q1 of fiscal year 2025 revealed impressive figures, with non-GAAP EPS surpassing expectations at $0.03, beating estimates by $0.02.

The company reported revenue of $280.73 million for the quarter, marking a robust 37.4% year-over-year increase and exceeding consensus forecasts by $8.34 million.

Annual Recurring Revenue (ARR) climbed to $1.176 billion, demonstrating a notable 37% year-over-year growth, driven by an expanding customer base.

Samsara now serves 1,964 customers with ARR exceeding $100,000, reflecting a substantial 43% increase from the previous year.

The outlook remains positive for Samsara, as evidenced by its upbeat projections for Q2, anticipating revenues in the range of $288 million to $290 million.

For fiscal year 2025, management anticipates total revenues between $1.205 billion and $1.213 billion, accompanied by non-GAAP EPS projections of $0.13 to $0.15.

Analysts’ perspectives

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Market sentiment towards Samsara remains buoyant, with analysts echoing optimism about the company’s growth prospects.

Recently, analysts at BMO Capital Markets reiterated their ‘Market Perform’ rating and price target of $40.

Piper Sandler analysts also reiterated their Neutral rating on the stock but reduced their price target to $36 from $41, citing cautious optimism amidst sector-specific challenges.

In contrast, Royal Bank of Canada reaffirmed an Outperform rating with an unchanged price target of $47.

As Samsara gears up for its Investor Day on June 27th, where further insights into its strategic roadmap and financial outlook are expected, let’s turn our attention to the charts and discern the technical indicators shaping Samsara’s path forward.

Recent decline: Bull run comes to an end?

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Samsara made its debut in the markets on 15th December 2021. After its IPO, the stock quickly entered a downtrend, plummeting from over $30 to below $10.

However, starting in January 2023, the stock experienced a strong recovery, reaching a new all-time high of $42.28 just a few weeks ago.

IOT chart by TradingView

Despite this impressive rebound, this bull run appears to have ended. The stock has dropped more than 25% from its all-time high in the past few days, breaking below its long-term bullish trendline.

Additionally, its 50-day moving average has crossed below the 100-day moving average today, indicating a potential change in trend.

Currently, the stock is under the control of bears, so we do not recommend taking a long position at this time.

However, investors who remain bullish and see this recent decline as a buying opportunity can consider purchasing the stock at the current level.

They must maintain a strict stop loss at $25.32, which represents the 50% retracement level from its all-time low to its all-time high.

For those with a bearish outlook, initiating a short position near $30 with a stop loss at $34.30 could be a strategy.

If the bearish momentum persists, the stock could fall to around $21.40, the 61.8% Fibonacci retracement level, which would be an appropriate point to book profits.

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