DOMO - Domo stock surges 15% after mixed feelings on Wall Street on Q3 results outlook

Domo ( NASDAQ: DOMO ) stock rose ~15% on Friday after a mixed sentiment from analysts following the company's Q3 results and fiscal 2023, 2024 outlook.

Q3 non-GAAP EPS narrowed to -$0.13, compared to -$0.32 in the year ago period.

Total revenue grew +21% Y/Y to $79M. Subscription revenue increased +22% Y/Y to $69M. Meanwhile, Billings grew +5% Y/Y to $74M.

Morgan Stanley lowered Domo's price target to $51 from $56, keeping an Overweight rating. The analyst noted that after several quarters of solid execution, the firm misjudged the impact of the sales execution and sales strategy challenges that started in Q1 and find the recent results "clearly disappointing."

The analyst, however, added that while growth is slowing as macro environment weakens, management is countering it by a faster pivot to profitability.

During the Q3 earnings call CFO Bruce Felt said that for Q4, the company was guiding to billings of about 107M.

Felt, whose resignation from the role was announced by the company in the earnings release, added that as mentioned in a previous call, Domo's near-term billings growth was being impacted by temporarily reduced quota capacity that it is in the process of increasing.

"We're being cautious in our billings outlook as we increase our capacity, and at the same time are aware of potential macro headwinds," noted Felt.

Commenting on the full year outlook, Felt said, "During the last two months, we've seen a significant improvement in sales rep turnover. So we're on the right path. Our guidance implies full year billings growth of about 10% year-over-year, down from our previous guidance of about 13%."

For fiscal year 2024 Domo expects revenue growth outlook to be about 10%, according to Felt.

Lake Street analyst Eric Martinuzzi cut the firm's price target on Domo to $23 from $25 and maintained a Buy rating. Martinuzzi was "pleased" with Q3 but was "disappointed in the FY24 growth expectation". The analyst had previously expected a 15% growth but now has lowered his forecasts.

Meanwhile, Cowen kept an Outperform rating but lowered its price target to $23 from $27. The analyst noted that the outlook for billings growth was below expectations, as the company was still absorbing sales restructuring and management heavily discounted close rates on larger deals given macro environment.

"While turn-around efforts are not taking hold as quickly as hoped, the macro is clearly a factor & we are encouraged by the Q/Q directional progress," Bloomberg reported citing the Cowen analyst.

Cowen added that the outlook seemed de-risked.

Outlook :

For full fiscal year 2023 the company expects revenue to between $306M and $307M; consensus $306.35M.

For further details see: