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Why Sumo Logic Dived 18% Lower on Monday

By Eric Volkman - Dec 7, 2020 at 6:58PM

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Better-than-expected Q3 results and annual guidance were apparently not good enough for investors.

What happened

Just before noon on Monday, the cloud-based IT monitoring specialist Sumo Logic ( SUMO 10.09% ) unveiled its first set of quarterly results since its IPO. While those figures were encouraging, an early mini-rally in the company's shares turned very sour, with the stock ultimately closing 18% lower.

So what

For Q3 of fiscal 2021, Sumo posted revenue of $51.9 million, which was 28% higher than the same period last year. On the bottom line, the company managed to trim its non-GAAP (adjusted) net loss considerably from the Q3 2020 deficit of $15.9 million to just shy of $3.3 million ($0.06 per share).

On average, prognosticators following the stock had estimated $41.9 million on the top line, and a much deeper adjusted net loss of $0.24 per share.

Businessperson punching through a laptop screen.

Image source: Getty Images.

Now what

Sumo gave outlook for both the current quarter and full fiscal year. For the latter period, revenue should grow by at least 29% to land between $200.3 million and $200.8 million, with adjusted per share net loss narrowing to $0.78 to $0.79. Both estimates are above analyst projections.

It's a bit of a mystery why investors shed the tech stock Monday afternoon. It might have something to do with the odd (and unexplained) timing -- earnings releases usually take place either before or after market open.

If this is in fact the reason, it's not a good one. Despite some strong competition Sumo is poised to do well from the continued migration of IT functions to the cloud.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Sumo Logic, Inc. Stock Quote
Sumo Logic, Inc.
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