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Here's Why LiveRamp Stock Was Up 33% in May

By Jon Quast – Jun 3, 2020 at 9:21AM

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The SaaS company delivered earnings surpassing analysts' expectations, but a new competitor also entered the spotlight.

What happened

Shares of LiveRamp (RAMP -3.77%) were up 33.2% in May, according to data provided by S&P Global Market Intelligence. Most of the stock's gains came after the software-as-a-service company reported results for the fourth quarter of fiscal 2020 that beat expectations on both the top and bottom lines.

The big gains from the earnings beat brought LiveRamp stock roughly back to where it started 2020. And it still sits almost 10% down from 52-week highs.

RAMP Chart

RAMP data by YCharts

So what

In Q4, LiveRamp, which offers various online services that help websites remember visitors, reported revenue of $106 million -- good for 35% year-over-year growth. For the year, revenue grew 33% to $381 million. According to generally accepted accounting principles (GAAP), the company lost $0.07 per share in Q4 and lost $1.85 for fiscal 2020. That's a big loss, but Wall Street expected a $0.60 loss per share in Q4. That huge beat sent the stock soaring.

As LiveRamp continues transitioning to more subscription-revenue streams, it's important to also note its annual recurring revenue (ARR). ARR finished the year up 29%, and gains here are pushing the company toward profitability. 

Investors were likely additionally encouraged to see LiveRamp continue to grow even as its employees worked remotely during the month. It speaks strongly to the ongoing adoption of its middleware software. And considering the company still has $718 million in cash with zero debt, it's well-capitalized to continue navigating current economic uncertainty.

A man draws an upward arrow on a transparent touchscreen.

Image source: Getty Images.

Now what

LiveRamp issued soft guidance for the upcoming first quarter of fiscal 2021. The company sees revenue growth of just 7% and an operating loss of $47 million. That guidance reflects a trend that management is seeing: potential customers are pushing off new spending right now, waiting for economic conditions to improve.

Even with the explanation, the soft revenue guidance was still surprising since LiveRamp is becoming an important piece of the advertising technology industry. It's already highly integrated with sell-side and buy-side ad platforms. And it could make this little-known technology company a market beater.

However, it's not without competition. In May, Comcast, Charter Communications, and ViacomCBS announced that they had taken joint ownership of Blockgraph, a company offering services similar to LiveRamp. These are three of the largest content publishers around, so Blockgraph is certainly well-positioned to compete in connected TV going forward. 

Jon Quast owns shares of LiveRamp. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.

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