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Why Shares of Smartsheet Gained 10% on Thursday

By Lou Whiteman – Updated Jun 6, 2019 at 6:28PM

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The cloud-collaboration software provider generated better-than-expected quarterly results.

What happened

Shares of Smartsheet (SMAR -0.96%) climbed 10% on Thursday after the cloud-collaboration software provider posted better-than-expected results and provided an optimistic outlook for the year. The results continue a strong run for one of the better-performing IPOs of 2018.

So what

Smartsheet, which offers a collaborative service that enables companies to plan, capture, manage, automate, and report on work at scale, reported a first-quarter loss of $0.12 per share on revenue of $56.2 million after markets closed Wednesday. This surpassed consensus estimates for an $0.18 per-share loss on $54.57 million in revenue.

A hand-drawn stock chart pointed higher.

Image source: Getty Images.

The company said it expects a full-year loss of $0.59 to $0.54 per share and raised its revenue guidance to $262 million to $265 million from $253 million to $257 million. Wall Street is expecting a $0.57 per-share loss on sales of $255 million.

"The momentum with which we ended fiscal year '19 continued in the first quarter," company CEO Mark Mader said in a statement.

Now what

It was the optimistic outlook that really seemed to excite Wall Street. After earnings, JP Morgan analyst Mark Murphy raised his price target to $47 from $45 on "strong" results and raised revenue and billing guidance. Jefferies analyst John DiFucci noted that the guidance demonstrates management's continued optimism about the business.

Smartsheet trades at an optimistic 23.4 times sales, within range or ahead of larger, better established cloud names like Twilio and MongoDB.

The company is going to have to generate substantial growth to justify that multiple. But at least for now, it appears headed in the right direction.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends MongoDB and Twilio. The Motley Fool has a disclosure policy.

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