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Why SVMK Stock Soared 33% Last Month

By Evan Niu, CFA – Dec 4, 2018 at 5:44PM

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The SurveyMonkey parent reported earnings last month, while a rival's acquisition encouraged investors.

What happened

Shares of SurveyMonkey parent SVMK (MNTV 0.22%) soared by 33% last month, according to data from S&P Global Market Intelligence, after the company reported its first earnings release since going public in September. Additionally, a rival got acquired in November, suggesting that the survey software market has a bright future.

So what

Revenue in the third quarter jumped 18% to $65.2 million, of which 88% came from the company's self-serve channel. That sales channel is crucial to SVMK's ability to scale while keeping costs in check. The remaining 12% of sales came from the sales-assisted channel, where sales reps take a more hands-on approach with customers. SVMK ended up posting a net loss of $102.4 million, or $0.99 per share, although most of that was attributable to common IPO-related expenses. Most companies recognize substantial stock-based compensation (SBC) expenses when they go public, which typically triggers the recognition of SBC expenses associated with equity grants given to employees prior to the IPO.

SurveyMonkey logo

Image source: SVMK.

Investors were also pleased that SVMK is growing its enterprise customer base, which now stands at 3,200. The size of that enterprise customer base was up 10% on a sequential basis. The company now has 621,000 total paying users.

Now what

Just days before the release, enterprise software giant SAP said it would acquire Qualtrics in an $8 billion deal. Qualtrics, which makes "experience management" software, was preparing to go public, filing its S-1 Registration Statement with the SEC in October. "Experience management" is just another way to say Qualtrics allows customers to conduct research with surveys in order to gather data and glean experience insights. The purchase price represented a considerable premium over the $6 billion valuation that Qualtrics was expected to fetch in an IPO.

While Qualtrics is larger and growing faster than SurveyMonkey, SVMK CEO Zander Lurie argued on CNBC last month that SAP's acquisition "validated just how big this category is." Lurie continued, "This is a multimultibillion-dollar global category. There are hundreds of thousands of organizations who need to buy enterprise software to measure the sentiment of their employees [and] their customers."

SVMK's guidance for 2018 had also come in above expectations. The company is forecasting 2018 revenue of $251.2 million to $253.2 million, while analysts had previously been modeling for $249 million in full-year sales.

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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