Should you buy Smartsheet (SMAR) stock now?

Smartsheet (NYSE: SMAR) has been able to win customers and increase market share consistently, in an industry that is getting crowded. While shareholders will be curious to know about the management’s turnaround plan, analysts are quite bullish about the firm’s growth prospects.

Also read: Smartsheet Q3 2020 Earnings Call Transcript

The workforce management platform has been facing cost-escalation, mainly due to aggressive marketing activities that involve constant sales-force expansion both in the domestic market and overseas. The general view is that the company stands to benefit from constant innovation and technology, thereby gaining market cap and creating shareholder value. Moreover, the stock is fairly valued with sufficient room for growth. It has a Strong Buy rating, on average, with an optimistic price target of about $55.

Stock Performance

Smartsheet shares recovered towards the end of 2019 after losing momentum mid-year. This week, they traded broadly at the levels seen at the beginning of 2020 after gaining 21% in the past twelve months. The stock will likely maintain its upward trajectory at least until the next earnings report. The uptrend sets the right backdrop for holding the stock, and for prospective investors to own it. Needless to say, Smartsheet remains vulnerable to the ups and downs the software industry frequently goes through.

Sustainability

A key factor that investors can count on is the company’s impressive net dollar retention rate, which shows the customer-base expansion is sustainable. When it comes to the weak cash flow, it is normal in the case of tech firms like Smartsheet, which is fast emerging as a leader in collaborative work management.

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Being able to offer a cloud-based platform gives the company an edge over its close rivals. The robust revenue growth justifies the heavy cash burn, but there is uncertainty as to when the company would turn profitable.

In the Red

Smartsheet has been incurring losses for a long time and market watchers expect the company to report a loss when it releases fourth-quarter results on March 17 after the closing bell. In the third quarter, net loss widened year-over-year to $ 0.15 per share hurt by a marked increase in expenses, while revenues gained more than 50%. Analysts had predicted a weaker outcome.

Listen to on-demand earnings calls and hear how management responds to analysts’ questions