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Why JFrog Stock Dropped 12% on Friday

By Demitri Kalogeropoulos – Aug 6, 2021 at 11:23AM

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Wall Street wanted to see accelerating sales growth, but it was disappointed.

What happened

JFrog (FROG -0.70%) investors lost ground to the market on Friday. The stock lost over 12% as of 11 a.m. EDT even as the S&P 500 ticked slightly higher, according to data provided by S&P Global Market Intelligence.

The drop added to significant short-term losses so far in 2021 and was driven by a poorly received earnings report.

A man working behind a computer screen.

Image source: Getty Images.

So what

The company, whose development platform helps software makers build and maintain their products, had good operating news to report. Revenue rose 34%, mainly thanks to rising demand for JFrog's cloud services.

That result was just a touch above the outlook that management had issued back in early May but marked a slowdown from the prior quarter's 37% increase. "JFrog again reported a strong quarter across the business," CEO Shlomi Ben Haim said in a press release.

Now what

Wall Street wasn't thrilled with the tech stock's new short-term outlook that predicts Q3 revenue of between $52 million and $53 million. Management said in a conference call that subscription renewals might be pressured by a pull-forward impact from a discount the company offered on early commitments.

Even still, JFrog raised its 2021 growth outlook slightly, with gains likely hitting 35% for the full year. Growth is expected to speed up a bit in Q4 after slowing again next quarter. Wall Street had been hoping for a more aggressive forecast. And, just as they did following the previous report, investors are sending JFrog's shares lower as they wait for more concrete evidence of accelerating sales gains.

Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends JFrog Ltd. The Motley Fool has a disclosure policy.

Stocks Mentioned

JFrog Ltd. Stock Quote
JFrog Ltd.
FROG
$22.60 (-0.70%) $0.16

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