Morgan Stanley has recently upgraded ServiceTitan (TTAN) from an Equal-weight to an Overweight rating, raising its price target from $125 to $131. This adjustment positions the stock as a top pick within its sector, reflecting a strong belief in its future potential.
Currently, ServiceTitan is trading at over a 25% discount compared to similar vertical software companies when evaluated on an EV/Gross Profit basis, adjusted for growth. This significant valuation gap has prompted Morgan Stanley to reassess its outlook, especially as the firm noted a marked improvement in the company”s operational momentum and execution.
Analyst Josh Baer highlighted that the revised estimates now exceed consensus expectations, citing a notable shift in the commercial segment”s growth trajectory and enhanced go-to-market strategies. These improvements address earlier concerns regarding high expectations and the challenges of replicating success from residential markets into commercial ones.
The firm”s optimism is underscored by anticipated catalysts, including potential outperformance in the fourth quarter and fiscal 2027 guidance that could surpass current consensus estimates. Morgan Stanley”s analysis suggests that the software stock is in an uncommon yet appealing position, indicating that the current discount may not be justified given the company”s growth durability.
Moreover, the integration of data and artificial intelligence into ServiceTitan”s offerings is seen as a long-term competitive advantage. This innovative approach, coupled with a solid track record of execution, enhances the company”s market position, suggesting multiple avenues for future growth.
Furthermore, the balance of potential outcomes now appears to favor positive developments, with the firm noting a bull-bear skew of better than 5:1. Alongside Morgan Stanley”s upgrade, Needham has maintained a Buy rating on the stock, setting a price target of $140 earlier in January.
However, it”s important to note that insider sentiment regarding the stock has turned negative. Recent reports indicate that 68 insiders have increased their selling of TTAN shares compared to earlier in the year, raising questions about the sustainability of the current momentum.
As ServiceTitan navigates these dynamics, investors will be closely monitoring the firm”s performance in the upcoming quarters, particularly in light of the raised expectations and the evolving landscape in the software market.
