What Happened:
Shares of software development tools maker JFrog (NASDAQ:FROG) jumped 6.2% in the afternoon session after Morgan Stanley analyst upgraded the stock's rating from Equal Weight (Hold) to Overweight (Buy) and raised the price target from $32 to $42. The price target implied the potential for 20% upside from where shares traded when the rating was announced. The optimistic outlook is based on a view that the company will benefit from a rebound in the software development space, new product launches, and improved cloud growth.
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What is the market telling us:
JFrog's shares are very volatile and over the last year have had 12 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 about 2 months ago, when the stock gained 8.8% on the news that the company reported third quarter results that beat analysts' revenue, billings, adjusted EBITDA and EPS estimates. JFrog attributed this impressive performance to the sustained strength of its cloud business and the expansion of its customer base as the adoption of its supply chain platform accelerates. Notably, JFrog secured numerous new large contracts during the quarter, and free cash flow demonstrated significant improvement. Looking ahead, the revenue guidance for the next quarter and full year came in in-line with consensus expectations. Overall, this was a great quarter, showing that the company is performing better than previously expected.
JFrog is up 58.1% since the beginning of the year. Investors who bought $1,000 worth of JFrog's shares at the IPO in September 2020 would now be looking at an investment worth $537.12.
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