What Happened:
Shares of application performance management software company New Relic (NYSE:NEWR) fell 5.97% in the pre-market session after the company reported fourth quarter results that beat analysts' expectations for revenue and earnings per share (EPS). Additionally, there was an improvement in gross margin, and the company generated strong free cash flow, bucking the trend of cash burn observed in the past two quarters. However, the revenue guidance provided for the upcoming quarter and the full year both fell short of Consensus expectations. Despite this, bottom line guidance remained strong, as the operating income guidance for the next quarter and full year exceeded estimates. The market seemed primarily concerned with the weak sales outlook. Nonetheless, management offered updates regarding the transition to a consumption-based model, which has impacted the topline.
What is the market telling us:
New Relic's shares are quite volatile and over the last year have had 22 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.
New Relic is up 39.2% since the beginning of the year, and at $78.36 per share it is trading close to its 52-week high of $84.95 from May 2023. Investors who bought $1,000 worth of New Relic's shares 5 years ago would now be looking at an investment worth $812.92.
Is now the time to buy New Relic? Access our full analysis of the earnings results here, it's free.