The latest results indicate that Samsara Inc. (NYSE:IOT)’s growth engine remains solid. That prompted BNP Paribas Exane to raise its price target on Samsara to $55 from $40 on September 4. The firm also maintained an Outperform rating on the stock.
The price target raise followed another quarter of 30% YoY revenue growth at Samsara. The company also reported adding a record number of large customers. On the back of those strong numbers, Samsara raised its fiscal-year outlook. Samsara provides software and connected hardware that enable businesses to run large physical operations.
For investors, the key question now is whether Samsara can sustain the growth momentum to justify the higher valuation multiple behind the new price target.
Samsara’s Growth Engine Remains Intact
Samsara Inc. delivered fiscal Q2 revenue growth of 30% to $508.4 million. Analysts were expecting revenue of $483 million. More importantly, ARR climbed 30% to $2.13 billion, underscoring continued strength in the all-important subscription business. Adjusted EPS was $0.20, compared favorably with the consensus estimate of $0.16.
The company added 242 customers contributing at least $100,000 in ARR, along with 20 customers contributing more than $1 million. The large-customer momentum supports BNP Paribas Exane’s view that demand remains strong among enterprise customers. Also, public-sector wins and expansions exceeded expectations.
Samsara raised its full-year revenue outlook. It now expects revenue to come in the range of $2.04 billion to $2.05 billion. The previous guidance called for revenue of $2.005 billion to $2.013 billion. Adjusted EPS guidance was raised to $0.76 to $0.78, from $0.70 to $0.72.
The Valuation Is Becoming the Real Test
BNP Paribas Exane’s new $55 price target is based on a valuation assumption of 13 times calendar-year 2027 sales. The previous $40 target was based on 10 times sales for the same period.
That makes sustained solid growth increasingly important to the investment case. If Samsara can continue expanding ARR at 30% and maintain strong margins, investors may be willing to pay a premium for the stock.
However, BNP Paribas Exane expects net new ARR growth to moderate in the near term as comparison gets tougher. That creates the strongest bear argument. Samsara could remain a fast-growing company but still falling short of the growth rate required to support the higher sales multiple.
If ARR growth remains resilient as comparisons become harder, the higher multiple becomes easier to defend. However, if growth decelerates sharply, the 13x sales assumption leaves less room for mistake.
Investor Positioning Is Becoming More Constructive
The number of hedge funds in Samsara Inc. declined to 40 funds in Q2 from 45 in Q1. But the behavior of several major investors was notably bullish. BAMCO Inc., the top fund in Samsara, increased its stake 54% to 7.9 million shares. It previously raised its stake 25% in Q1 and 22% in Q4. Balyasny Asset Management increased its position 492% to 3.1 million shares, while Freestone Grove Partners boosted its stake 34% to 2.9 million shares. Short interest stood at 28.7 million shares, or 7.59% of the public float as of August 14, reflecting moderate level of skepticism.
Samsara’s latest results strengthen the case that its growth engine remains solid. But the stock now faces a higher bar. The company must demonstrate that the ARR growth momentum can persist long enough to justify the lofty sales multiple.
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