What happened
Shares of Domo (DOMO 0.51%) rose 67.9% in December, according to data from YCharts. The company posted strong third-quarter results early in the month, and its stock continued to climb thanks to an improving outlook and momentum for the broader market.
Domo published its third-quarter results on Dec. 3, delivering sales and earnings for the period that topped the market's expectations. The cloud software company posted an adjusted loss per share of $0.40 on revenue of $53.65 million, while the average analyst estimate had called for a per-share loss of $0.44 on sales of $51.76 million.
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So what
Third-quarter sales were up roughly 19.8% year over year, with the gains being largely driven by new customers despite a more challenging backdrop created by the coronavirus pandemic. Subscription revenue climbed 24% year over year in the quarter to reach $46.9 million. Billings for the period came in at $55.7 million, up 25% compared to the prior-year period, and the business was cash flow positive on an adjusted basis.
The strong results prompted positive coverage from analysts, which helped power additional gains for the share price in December.
JMP Securities analyst Patrick Walravens published a note on the stock on Dec. 4, maintaining an outperform rating and hiking the firm's one-year price target from $53 to $60 per share. Morgan Stanley's Sanjit Singh then published a note on Domo on Dec. 17, upgrading his rating from equal weight to overweight and boosting his price target from $41 to $70 per share.
Now what
Domo is guiding for fourth-quarter revenue to come in between $53.3 million and $54.3 million, representing growth of roughly 16.5% at the midpoint of the target. Management is forecasting an adjusted loss between $0.42 and $0.46 per share based on 30.1 million weighted-average shares outstanding.
For fiscal 2021, Domo expects a per-share loss between $1.83 and $1.87 based on revenue between $206.6 million and $207.6 million. The company has a market capitalization of roughly $1.9 billion and is valued at approximately 9.3 times this year's expected sales. Domo has a growth-dependent valuation, but the overall data analytics market looks poised for long-term expansion, and the company should have opportunities to capitalize as more businesses move to accelerate their digital transformations.
