Freshworks slips as Canaccord Genuity cuts, citing valuation, slowing business
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Freshworks (NASDAQ:FRSH) shares slipped in early trading on Wednesday as investment firm Canaccord Genuity downgraded the cloud software company, citing worries over its valuation and slowing business metrics.
Analyst David Hynes Jr. lowered his rating to hold from buy and cut the price target to $15 from $17, noting that Freshworks (FRSH) Freshservice business is still operating with strength, but the company's overall growth has largely come from adding new seats, something which may be harder to come by in a weakening economy. 
"With growth generally harder to come by, and in many cases sales/support headcounts shrinking, this growth is increasingly at risk, which will manifest in continued pressure on [net retention rate] metrics," Hynes Jr. wrote in a note to clients.
Hynes Jr. also noted that Freshworks (FRSH) has significant exposure to the small and medium-sized business market and with more than 60% coming from international markets, the negative impact to the company's revenue could be outsized.
"Furthermore, with short sales cycles, much of which are driven by self-discovery/web-try-buy, we donât believe FRSH has the same level of new business visibility as enterprise counterparts," Hynes Jr. added.
The analyst also noted that Freshworks has "good" products but does not have leadership in any category, going up against the likes of Zendesk (ZEN) in support, ServiceNow (NOW) and Atlassian (TEAM) in IT Service Management and Salesforce (CRM) and HubSpot (HUBS) in sales.
Late last month, Wolfe Research downgraded Freshworks (FRSH), citing worries over slowing growth and the weakening global economy.
Analysts are largely bullish on Freshworks (FRSH). It has a HOLD rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates FRSH a BUY.