Unlike some of the tech companies that got listed recently, Anaplan has expanded its market share consistently and doubled shareholder value since the Wall Street debut, which can be attributed to the popularity of its unique product line called connected planning software. The stock ended 2019 on a high note, before losing momentum in the Covid-induced market selloff.
Fair Valuation
The valuation looks fair after the recent pullback, but market watchers are divided in their view on the investment potential. The current price target represents an 8% increase. The main weakness of the stock is its volatility, which calls for caution at a time when the economy is headed for a potential recession amid the market turmoil.
Subscriber Growth
Anaplan has been adding new subscribers consistently for some time, but the company continued the losing spree throughout last year as the positive top-line performance failed to translate into profit.
Subscription revenue, which accounts for about 90% of total revenues, jumped 50% in the fourth quarter and topped the market’s prediction. Nevertheless, the bottom-line remained in the red, though the loss narrowed year-over-year and beat the Street view. The results exceeded the market’s forecast, but investors were disappointed by the slowdown in billing growth.
Turnaround Hopes
Going by the encouraging trend in margin performance, due to the uptick in orders and slower expense growth, the company is probably on track to achieve profitability this year, on an adjusted basis. Anaplan’s CEO Frank Calderoni, a veteran who earlier served tech majors like Cisco (CSCO), is experienced enough to guide the company to the much-awaited turnaround.
Focus on Billing
When Anaplan reports its first-quarter results on May 26 before the opening bell, the stakeholders will be keeping a tab on billing performance and the management’s outlook for the year. Though growth will likely be hampered – in a market that has been battered by the coronavirus – the rapid adoption of cloud-based services during the lockdown bodes well for the company.
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Shares of Anaplan are currently in the recovery mode after dropping to a 12-month low in March when the pandemic played havoc with the market. Currently, the stock is trading at the levels seen a year earlier. It declined 24% since the beginning of the year.