Domo stock on a free fall as Q2 earnings and outlook fails to impress

Domo (NASDAQ: DOMO) stock plunged above 30% as the second quarter earnings and outlook fell short of estimates. The cloud platform’s shares have tumbled 49% since March after the company touched a new 52-week high of $47 mark. The firm’s stock has been volatile since it went public last June.

Muted Outlook

Looking ahead into the third quarter, Domo expects sales of $41.5-42.5 million and non-GAAP loss of $1.00-1.04 per share. However, the headline numbers failed to beat estimates. The street is anticipating sales of $44.2 million and adjusted loss of 90 cents per share.

The fiscal year guidance provided by the company also fell short of analysts’ expectations. Domo’s revised revenue for the full-year period stands at $168-169 million and adjusted loss to be in the range of $4.00-4.10 per share.

However, the street is expecting revenue of $173.5 million and non-GAAP loss of $3.82 per share. Last quarter, Domo guided sales to be between $173-174 million and adjusted loss per share to be $3.79-3.87.

Q2 Performance

Revenue rose 22% to $41.7 million over last year, but still down 10% compared to the 32% growth rate reported in the Q2 2019 period. Subscription revenue contributed 84% to the top line, consistent with the last quarter.

The cloud platform continued its cost control measure into the second quarter. Operating expenses contracted 14% on a GAAP basis and was down 7% on an adjusted basis.

Rising Competition

Billings is one of the key metrics tracked by the street. The company reported 9% growth in billings, which is disappointing for investors. It’s worth noting that in the last four quarters Domo’s billings growth rate has been above 25%. The single-digit growth rate raises concerns about the ability of the firm to tackle competition and add more clients to its platform.

The competitive landscape for Domo has changed in 2019 with the recent acquisition of its peers by tech giants. In June 2019, Salesforce (CRM) acquired Tableau (NYSE: DATA) and Google purchased Looker for $2.6 billion to beef up their analytics offerings. With nimble rivals to compete against, it would be a tough task for Domo to retain existing customers and add new clients to its platform.

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