Why Smartsheet Stock Soared 95% in the First Half of 2019

What happened

Smartsheet (NYSE: SMAR) stock skyrocketed 95% in the first half of the year, according to data from S&P Global Market Intelligence. The S&P 500 returned 18.4% over the period. 

Shares of the cloud-based collaboration software provider have continued to climb this month, bringing their 2019 gains to 113% through Thursday, July 11. The broader market has returned 21% so far this year. 

Buying shares of the Bellevue, Washington-based company at its April 2018 initial public offering has turned out to be a smart move. Since its IPO at $15 per share, Smartsheet stock has soared 253% through July 11. 

Arrow pointing upward at about a 45 degree angle on a blue graph background.

Image source: Getty Images.

So what

We can attribute Smartsheet stock's market outperformance in the first half of the year to investor enthusiasm about the company's early financial performance as a public entity and its growth potential. Both of those were reflected in the fiscal first-quarter 2020 report it released in early June, when the company beat Wall Street's consensus estimates for revenue and earnings, and raised its guidance. 

In fiscal Q1, which ended April 30, revenue surged 55% year over year to $56.2 million, exceeding the $54.6 million that analysts had been expecting. Subscription revenue came in at $50.3 million, an increase of 57%, while professional services revenue rose 38% to $5.9 million.

As is typical for a newly public company, Smartsheet is not profitable. In fiscal Q1, its total net loss expanded 38% to $19.8 million, which translated to its per-share loss narrowing 72% to $0.19. (The per-share loss narrowed only because of the large increase in the number of shares outstanding over the last year.) On a non-GAAP (generally accepted accounting principles) basis, total net loss expanded 18% to $13.0 million, which translated to the per-share loss coming in at $0.12, unchanged from the year-ago period. This was significantly better than the loss of $0.18 per share that the Street was looking for.

Now what

For the full fiscal year, management raised its revenue guidance range to between $262 million to $265 million, up from the prior forecast of $253 million to $257 million. This would represent annual growth of 47% to 49%. The company expects an adjusted non-GAAP per-share loss of $0.59 to $0.54 in fiscal 2020.

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Beth McKenna has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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