However, it is interesting that on Monday, Morgan Stanley downgraded the stock to Underweight from Equal-Weight. To downgrade the stock only a few days ahead of the earnings report suggests that the analyst has a very strong conviction on their call. The stock is quite expensive, with a 1-year forward P/S of about 15x, and with the stock surging higher ahead of the quarterly report, the risk-reward profile has skewed in an unfavorable manner. As we discuss below, TEAM does have a considerable history of exceeding analysts' expectations, but, its track record in terms of its guidance is a little more mixed.
- When the company issued its Q1 results on October 18, it guided for Q2 EPS of $0.21 and revenue of $287-$289 mln (+35% at mid-point). The current consensus sits right at this guidance; analysts forecast EPS of $0.21 and revenue of $288.3 mln. In addition to its profitability, one of the more attractive fundamental qualities for TEAM has been its steady, consistent revenue growth -- which speaks to its high level of recurring revenue. To put this consistency into perspective, from 2Q15 - 1Q19, revenue growth has ranged from 34-45%.
- TEAM has also been remarkably predictable when it comes to outperforming estimates. That said, the degree to which it has been exceeding expectations has been rather pedestrian, especially for a growth company. Excluding its first quarterly report as a public company (2Q15), TEAM's EPS upside has fluctuated between a penny and $0.03. The company has also topped the Street's revenue estimates in each quarter since going public, with some more impressive beats in there, relative to its EPS upside performance
- The last two quarters, TEAM has provided upside EPS and revenue guidance for the quarter ahead. But in the two quarters before that, it issued mixed guidance with its forecast for EPS coming in below consensus and revenue slightly above. In order to meet analysts' expectations for Q2, it will need to guide for EPS of $0.18 and revenue of $300.7 mln.
- Outside of the main headline numbers, another key metric for investors to keep an eye on is its total customer count. For some context, last quarter, TEAM added 5,888 net new customers (+4.6%) for a total of 131,684. In the quarter before that, it added 6,638 net new customers (+5.6%).
- During the earnings call last quarter, management commented that it saw solid business trends across the board, particularly in the cloud side of its business. The company was also enthusiastic about its newly acquired OpsGenie platform, which enables companies to better plan for and respond to IT disruptions. Today's world of interconnected cloud services and microservice architectures has created infinitely more opportunities for something to go wrong and disrupt service. When that happens, there's an urgent need to alert the right people or teams to fix things. OpsGenie's technology quickly routes alerts to the appropriate IT teams.
- TEAM has also recently introduced Jira Ops, its new product, which is an end-to-end incident management platform. Jira Ops will serve as a unified incident command center for IT and software teams, providing them a central place to coordinate work during an incident. Together with OpsGenie, these two products give TEAM a strong position in the incident management market. We would expect TEAM to focus on these two products during its call tonight.