This Stock is up More Than 10% in The Last Month: Will The Rally Continue?

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Written By Kris Enyinnaya

Domo, Inc., a cloud-based business intelligence software provider, offers a comprehensive platform that integrates various functionalities, including data warehousing, analytics, visualization, and more.

The company, which emphasizes a subscription-based revenue model, is transitioning towards a consumption-based model to potentially enhance customer sales. With over 2,500 clients, Domo is headquartered in American Fork, UT, and has a market capitalization of around $400 million.

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Recent Financial Performance

In its third-quarter report released on November 30th, Domo announced nearly unchanged earnings with a slight 1% increase in sales, reaching $79.7 million.

About Domo - Our Story & Executive Team | Domo
Credits: Domo

Subscription fees, contributing $71.3 million, saw a 3% rise from the previous year. The company’s Remaining Performance Obligations (RPO) also saw a 4% increase, totaling $367.2 million.

Despite a stable GAAP gross subscription margin of 84%, Domo reported a net loss of $16.4 million, or 45 cents per share. The company has projected a non-GAAP net loss of 24 to 28 cents for the 2024 fiscal year, with revenue expectations between $317.8 million and $318.8 million.

Industry Analysts and Insider Activity

Post-Q3 earnings, several analysts have shared their perspectives on Domo. Lake Street and JMP Securities have reiterated their Buy ratings, with price targets of $17 and $23, respectively.

Meanwhile, TD Cowen, D.A. Davidson, and Morgan Stanley have maintained Hold ratings. Notably, insiders, including the CEO, purchased around $10 million worth of shares in 2023, primarily in the first half of the year, with no insider transactions reported in 2024.

Financial Health and Market Position

As of the third quarter’s end, Domo’s cash reserves stood at $57.4 million, with $4.3 million used in operating activities.

The company reported $108 million in long-term debt. While Domo is making strides in reducing losses—from 61 cents per share in FY2023 to an anticipated quarter per share in FY2024—the company faces challenges in accelerating sales growth.

Competing against giants like Microsoft, Domo’s focus on business intelligence may not align with current corporate priorities, which are leaning more toward AI and other technologies.

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Outlook and Recommendation

Domo’s efforts to narrow its losses are commendable, but the company appears to be in a state of limbo with limited prospects for significant sales growth.

Domo Launches Flexible AI Framework Domo.AI - CX Scoop
Credits: CX Scoop

The balance sheet is satisfactory, and insider purchases in 2023 signal confidence in the company’s future.

However, with continued losses expected in the upcoming year and a lack of immediate catalysts, it may be prudent to adopt a wait-and-see approach.

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