What happened
Shares of real-estate management technology company AppFolio (APPF 12.05%) jumped on Monday after receiving an upgrade from an analyst. Typically, this company is characterized by low average trading volume and by lower-than-average volatility. But today, activity for AppFolio stock surged, causing it to climb 13% as of 1 p.m. ET.
So what
Stephens analyst John Campbell upgraded his rating for AppFolio stock from equal weight (hold) to overweight (buy), according to Investing.com, which means he believes it will do better than average. To go along with the upgraded rating, Campbell also gave it a new price target of $212 per share, representing about 13% upside from where shares traded as of this writing.
Campbell reportedly is impressed with AppFolio's new emphasis on profitable growth. In the second quarter of 2022, the company's net loss shrunk to just $700,000 compared to a net loss of almost $30 million in the prior-year quarter.
Subsequent to second-quarter results, AppFolio's management laid off about 9% of its workforce. This will likely result in one-time charges that may reduce the company's profitability in the near term. But this decision was made to increase its profitability in the long term.
Now what
Although AppFolio is trimming its workforce, the company continues to grow at a healthy pace. For the year, management expects at least 25% year-over-year revenue growth.
The company's software products make it easier for property owners to manage the business aspects of real estate, and this is a large, resilient market. So far, AppFolio has done a good job increasing its market share. Considering it has been so successful in the past, it's understandable why the market is excited along with Campbell regarding its prospects as it transitions to better profitability.
