Please ensure Javascript is enabled for purposes of website accessibility

Why Domo, Inc. Stock Dropped 39.2% in July

By Keith Noonan - Aug 8, 2018 at 3:24PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The cloud software company couldn't hold on to the big stock gains it saw following its late-June initial public offering.

What happened

Shares of Domo, Inc. (DOMO 1.97%) stock plummeted 39.2% in July, according to data provided by S&P Global Market Intelligence. The data analytics company had its initial public offering on June 28, with shares up roughly 30% at the end of the stock's first day of trading. It didn't take long for the big gains to reverse, however.DOMO Chart

DOMO data by YCharts

Domo priced its initial public offering at roughly $21, valuing the company at roughly $510 million. Shares reached $27.30 at market close on June 28, and the company raised $193 million through the offering. 

A person using a touch-screen interface.

Image source: Getty Images.

So what

Domo has a cloud-based operating system tailored to provide data integration and analytics services for businesses. These features are meant to simplify business processes to the point where CEOs and other high-level management can make important operational decisions from their mobile devices.

Other than some skeptical coverage about the stock, there doesn't appear to have been much in the way of business news behind its big decline in July. Instead, the decline looks like a case of IPO excitement cooling off and its big opening gains reversing as a result. Domo's roughly $400 million market capitalization sits well below the roughly $2 billion valuation that the company had as a private entity earlier this year, but that doesn't necessarily mean that the stock is a bargain. 

Now what

As Motley Fool tech specialist Evan Niu points out, Domo posted a loss of $176.6 million on $108.5 million in sales in its last fiscal year. Marketing alone accounted for more expenses than sales recorded in the period.

Even after raising roughly $200 million through its IPO, Domo will have to address its cash situation. The company had just $72 million in its coffers as of April and recorded negative free cash flow to the tune of $148.7 million last fiscal year. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Domo Stock Quote
Domo
DOMO
$30.99 (1.97%) $0.60

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
331%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/20/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.