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Morgan Stanley has boosted its assessment of JFrog Ltd. (FROG) shares, shifting the rating from Equal-Weight to Overweight. The investment bank also revised the price target for the stock, setting it at $42, up from the previous $32 per share.

Analysts at Morgan Stanley highlighted JFrog’s resilience in growth despite a challenging spending environment, attributing it to the company’s pivotal role in securing the software supply chain. They anticipate a resurgence in software development projects, foreseeing a renewed focus by enterprises on transformation initiatives and the creation of AI-powered applications.

Emphasizing JFrog’s position within the realm of software releases, analysts see the company as poised for substantial growth, projecting a consistent 20%+ increase in top-line performance through CY27. They also predict robust operating and free cash flow margins of 21% and 26%, respectively, by CY27, indicating an impressive 40% growth in free cash flow over that period. This optimistic outlook underpins the new $42 price target set by the firm.

Morgan Stanley characterized JFrog Ltd. as “a solid compounder with an attractive valuation,” reflecting the bank’s positive outlook on the company’s future prospects.