Although recent "big data" IPO SurveyMonkey (SVMK)
rebounded off its lows-to-date during the middle of October, it nevertheless could
still use a positive catalyst, as the stock continues to trade more than 30%
below its IPO opening price. Today, it might just have one as a round of
bullish analyst initiations offer support for the beleaguered recent IPO. Today
is the quiet period expiration, allowing firms involved with the IPO to publish
research and estimates on the company for the first time.
First, to rewind, SVMK went public back on September 26 to rousing success. Specifically, its up-sized 15.0 mln share IPO priced at $12, above the expected $9-11 range. It then opened for trading with a stunning 56% opening pop to $18.75. Big data and cloud software deals have been in vogue for some time now, and SVMK is essentially a combination of both. That fact certainly didn't hurt its cause.
The IPO was also conservatively priced -- at least, for a technology IPO -- in the $9-$10 range, which equated to a P/S of about 5x annualized FY18 revenue. Also, back in late September, the markets were hovering around all-time highs, so conditions were more favorable then than they are now.
But the tables quickly turned against SVMK. In fact, its first day of trading also represented its highest level as the stock sank immediately lower thereafter. Part of the sell-off was simply due to profit-taking as IPO flippers locked in gains after the big opening pop. Then, the stock market, and technology stocks in particular, began to roll over. So, the decline in the stock during the last month has not been driven by any company-specific event. SurveyMonkey has not issued its quarterly results yet and has not yet confirmed a date for the report either.
After hitting post-IPO lows on October 10, the stock has been in rebound mode, but it still has a way to go in order to resume its IPO opening price. With the markets looking to rebound today, and with this set of bullish initiations, SVMK could be in position to make some more headway.
SVMK is a California-based provider of survey software products that are used by organizations to engage with their customers and employees. The company’s product, SurveyMonkey, has been on offer since after the company’s founding in 1999.
The company’s survey platform generates an average of more than 20 mln answered questions daily across 190 countries and territories. Organizations employ SVMK’s platform to collect Net Promoter Score data from customers, measure employee engagement, and conduct market research. More than 60 mln registered users have used the survey platform since inception, and more than 16 mln users were active within the past year. The company has more than 600,000 paying users across more than 300,000 organizations. The company has paying users in 98% of the companies that make up Fortune 500.
The company notes that unlike “Big Data” platforms, which focus on the “what” of the behavior of an organization’s users or constituents, SVMK employs a People Powered Data approach that captures the “why”. The company believes the People Powered Data approach provides more valuable insight that better allows organizations to respond to constituents’ needs.
SVMK’s survey platform uses SurveyMonkey Genius, a proprietary artificial intelligence-based survey creation assistant, which allows organization to build surveys by using insights extracted from SVMK’s database.
Taking a quick look at its financials, for the six months ended June 30, 2018, the company’s revenue grew 13.9% year/year to $121.19 mln. Gross margin weakened to 70.5% from 71.0%. The company reported a net loss of $27.18 mln for the first six months of 2018, up from a net loss of $19.10 mln reported one year ago. Loss per share widened to $0.27 from a loss of $0.19 for the first six months of 2017.
SVMK generated $22.03 mln from operating activities during the first half of 2018, up 49.2% year/year.
Quiet Period Expiration
So far this morning, the vast majority of initiations to come in have landed on the bullish side. The aforementioned sell-off certainly has a role in why analysts are taking a bullish stance, as the risk/reward profile looks much more attractive now than it did a few weeks ago.
BofA Merrill Lynch and SunTrust each assigned a Buy rating and $16 target on the stock -- 23% higher than the stock’s closing price on Friday. JMP also put a $16 target on the stock, along with its Market Outperform rating. JP Morgan initiated the stock with an Overweight and $15 price target, rounding out this morning's bullish initiations.
The lone cautious note we are seeing at the moment is UBS' Neutral. But, that firm also has a $15 target on the stock, which represents 15% upside.
To wrap up, the quiet period expiration comes at a good time for SVMK as the stock looks to build off of this recent rebound and establish positive momentum. While there isn't a date set yet, SVMK's quarterly report is also on the horizon, which could provide another spark for the stock. So, while shares still have work to do in terms of getting back to their IPO opening price, there are reasons to feel a little more optimistic about the stock this morning.
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