| Author | Message | ||
     Entrepreneur Kurra Bewarse Username: Entrepreneur Post Number: 3441 Registered: 05-2011 Posted From: 65.35.45.47 Rating: N/A |
SMAR Smartsheet not getting a smart reception from investors despite Q4 upside (66.47 -2.28) Smartsheet (SMAR -3%) is not getting a smart reception from investors despite reporting pretty significant upside for Q4 (Jan) EPS, revenue, and especially billings. SMAR benefited from an easing of COVID-related sales headwinds seen earlier in the year, saw continued strength from larger transactions, and had a strong close to the fiscal year. So, why is the stock lower? The guidance could have been better. SMAR guided to a wider-than-expected Q1 loss, but that's been par for the course for the company, so we are not worried; the company will likely report EPS upside. Of greater concern is the modest revenue upside expected for Q1 following big upside guidance last quarter. Also, the billings guidance of $118-119 mln (+31-32% yr/yr) represents a sequential step down from Q4 on both a percentage and a raw number basis: Q4 billings grew 49% yr/yr to $151.2 mln. Expanding on the billings a bit more, SMAR expects FY22 billings to be seasonally weighted towards the back half of the year. Billings, then, could be a bit of a headwind in 1H, which is a disappointment. Gross margin improved to 81% from 79% in Q3. As we mentioned in our preview, SMAR has been transitioning its legacy data centers to the public cloud, which has pressured margins. This was completed in Q3, which helped margins in Q4. However, margins could continue to be a bit of a headwind in FY22 as SMAR now looks to leverage public cloud infrastructure internationally. Tech stocks are weak today generally ahead of the Fed Statement at 2 p.m. ET. A rate change is unlikely, but the Fed's language on its outlook will affect the market. Higher rates are bad for stocks, especially for high-flying tech stocks. Despite the stock's reaction today, this was another good overall report. The billings number was the standout metric, in our view, and Q4's upside was quite robust. We think the comment about billings being more back-half weighted is being viewed as a disappointment, as SMAR had seemed to be turning a corner on billings in the past couple of quarters. Finally, the stock has pulled back over the past month as investors have rotated out of work-from-home plays and tech stocks generally and into reopening plays. We think this guidance was not eye-popping enough for SMAR to mitigate that rotation trend. Overall, SMAR has underperformed other work-from-home plays over the past year, but it sounds like business will pick up in the second half of the new fiscal year. |