Shares of cloud-based business intelligence specialist Domo (NASDAQ:DOMO) rose 41.5% in August of 2018, according to data from S&P Global Market Intelligence. The company had no news of note last month, including total radio silence from Wall Street analysts. The surge most likely resulted from investors staking their claims ahead of what looked like a promising earnings report.
Domo shares surged nearly 12% higher between August 19 and August 21 for no obvious reason and on relatively light trading volume. A 14% four-day gain followed near the end of the month, this time on some heavier trading volume. Still, no analyst chatter or company news drove the gains. The business intelligence sector at large was also pretty quiet in general.
When the earnings report arrived on September 7, market makers didn't quite know what to do with it. Domo beat Wall Street's expectations across the board in its first report as a publicly traded company, posting a net loss of $3.44 per share on $34.3 million in top-line revenues. In response, share prices surged 25% higher in the morning, but cooled down in a hurry. At the end of the day, Domo investors had taken an 11% haircut instead.
This small but ambitious company has only been on the stock market for a couple of months, and investors are unsure of how to analyze and evaluate Domo's stock. In simple terms, it's pretty much impossible to produce a completely fair valuation for this stock, which marries negative earnings and cash flows with rampant sales growth and huge long-term goals.
Expect Domo's volatility to remain hotter than lava until the company grows up a bit and starts to report financial results that make some kind of sense to analysts and shareholders alike. Until then, I'm certainly happy to watch Domo from the sidelines.