What Happened:
Shares of data visualization and business intelligence company Domo (NASDAQ:DOMO) fell 8.8% in the morning session after the company filed a prospectus for a $300M mixed-shelf offering. A mixed-shelf offering gives a company the flexibility to issue new securities over time without needing a separate registration statement for each new offering. The company noted that the prospectus is not an offer to sell securities. However, the filing raised uncertainty about the company's future need for cash, which the market doesn't like. Also, investors often react negatively to the potential for dilution, and the stock's reaction suggests the market anticipated the company might issue additional securities.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Domo? Access our full analysis report here, it’s free.
What is the market telling us:
Domo’s shares are very volatile and over the last year have had 21 moves greater than 5%. In context of that, today’s move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 4 months ago, when the stock dropped 16% on the news that the company reported first-quarter earnings results, with billings missing Wall Street's estimates. Guidance wasn't encouraging, as revenue projections for the next quarter missed analysts' expectations. Potentially more worrisome, the company did not reiterate or update its full-year guidance, which it gave last quarter. This could mean that visibility into demand trends is murky or changing rapidly. Adding to the concerns, cash flow turned negative, following the rare positive cash inflow recorded in the previous quarter. Overall, this was a mediocre quarter for Domo, providing little reasons for investors to stay positive.
Domo is down 30.7% since the beginning of the year, and at $6.96 per share it is trading 41.6% below its 52-week high of $11.90 from February 2024. Investors who bought $1,000 worth of Domo’s shares 5 years ago would now be looking at an investment worth $441.03.
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