What Happened:
Shares of project management software maker Smartsheet (NYSE:SMAR) jumped 18.5% in the morning session after the company reported first-quarter earnings results that narrowly topped analysts' revenue expectations. The bright spot with regard to guidance was that while revenue guidance was in line with expectations, non-GAAP operating profit guidance was well ahead for the next quarter and the full year. This shows that revenue growth is on track, but that growth is much more profitable than anticipated. Overall, this was a solid quarter for Smartsheet.
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What is the market telling us:
Smartsheet's shares are very volatile and over the last year have had 12 moves greater than 5%. But moves this big are very rare even for Smartsheet and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 12 months ago, when the stock dropped 18.2% on the news that the company reported first quarter results that beat analysts' revenue, subscription revenue, free cash flow, and earnings per share estimates.
On the other hand, there was a decline in net revenue retention rate, which missed expectations slightly. Customer growth also decelerated and missed. Similarly, revenue guidance for the next quarter was below Consensus, while the full-year guidance was roughly inline. Operating income guidance also came in roughly in line with Consensus. The company touched on its AI capabilities adding that "We're planning to expand the AI-based capabilities in our platform to help our customers unlock new, higher value work." Overall, it was a mixed quarter for the company, with the market likely more focused on the weak guidance.
Smartsheet is down 5.5% since the beginning of the year, and at $44.12 per share it is trading 14.6% below its 52-week high of $51.66 from June 2023. Investors who bought $1,000 worth of Smartsheet's shares 5 years ago would now be looking at an investment worth $980.41.
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