Freshworks (FRSH) Stocks Slid on Investors’ Doubt Over its AI Connection

ClearBridge Investments, an investment management company, released its “ClearBridge SMID Cap Growth Strategy” first quarter 2024 investor letter. A copy of the letter can be downloaded here. Strong corporate earnings, enthusiasm over AI, and anticipation of interest rate cuts boosted the equity market rally in the first quarter. The growth stocks outperformed their value counterparts during the quarter as benchmark Russell 2500 Growth Index returning 8.51% versus the 6.07% return of the Russell 2500 Value Index. Against this backdrop, the strategy underperformed its Russell 2500 Growth Index benchmark in the quarter. Industrials and healthcare sectors were the leading contributors while the real estate and IT sectors detracted. In addition, please check the fund’s top five holdings to know its best picks in 2024.

ClearBridge SMID Cap Growth Strategy highlighted stocks like  Freshworks Inc. (NASDAQ:FRSH), in the first quarter 2024 investor letter. Freshworks Inc. (NASDAQ:FRSH) is a software development company that offers software-as-a-service products. The one-month return of Freshworks Inc. (NASDAQ:FRSH) was -7.63%, and its shares lost 26.05% of their value over the last 52 weeks. On June 24, 2024, Freshworks Inc. (NASDAQ:FRSH) stock closed at $12.35 per share with a market capitalization of $3.69 billion.

ClearBridge SMID Cap Growth Strategy stated the following regarding Freshworks Inc. (NASDAQ:FRSH) in its first quarter 2024 investor letter:

"Software development company Freshworks Inc. (NASDAQ:FRSH), whose products include customer service, operations and customer relationship management applications, also saw its share price drift lower as investors began to worry that Freshworks was no longer an AI beneficiary, though we don’t believe this to be the case."

A close-up picture of a software engineer typing code on a laptop.

Freshworks Inc. (NASDAQ:FRSH) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 32 hedge fund portfolios held Freshworks Inc. (NASDAQ:FRSH) at the end of the first quarter which was 29 in the previous quarter. Freshworks Inc. (NASDAQ:FRSH) reported solid growth in the first quarter and generated revenue of $165.1 million, representing an increase20% year over year. While we acknowledge the potential of Freshworks Inc. (NASDAQ:FRSH) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

We discussed Freshworks Inc. (NASDAQ:FRSH) in another article and shared Carillon Eagle Small Cap Growth Fund's views on the company. In addition, please check out our hedge fund investor letters Q1 2024 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.