What Happened: Shares of data visualization and business intelligence company Domo (NASDAQ:DOMO) jumped 10.3% in the morning session after the company reported third quarter results that topped analysts' EPS estimates. Its revenue and RPO (remaining performance obligations) also slightly beat Wall Street's projections, and its EPS guidance for the next quarter came in better than expected.
Notably, the company delivered the highest Non-GAAP operating income in history of $5 million, coupled with a historic operating margin of 6%. This suggests a potential improvement in the company's operating leverage, even though it continues to experience cash burn.
Domo also shared positive results on the adoption of its consumption pricing model, with over 20% of its annual recurring revenue (ARR) now on this model. With more than 400 customers on consumption contracts, representing over 15% of the customer base and over 20% of ARR, the company plans to transition the majority of its revenue to the consumption model by the end of next year, citing accelerated user growth and increased adoption of premium features like data science.
Zooming out, we think this was a strong quarter, showing that the company is on target.
Is now the time to buy Domo? Find out by reading the original article on StockStory.
What is the market telling us: Domo's shares are very volatile and over the last year have had 44 moves greater than 5%. But moves this big are very rare even for Domo 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 3 months ago, when the stock dropped 7.7% on the news that the company reported second quarter results in line with expectations. However, it lowered its full-year revenue guidance, missing analysts' estimates. In addition, revenue guidance for the next quarter came in below consensus estimates, and the company continued to burn cash. Overall, this was a weak quarter for Domo, and the market is punishing the stock for a slower growth outlook.
Domo is down 23.8% since the beginning of the year, and at $10.69 per share it is trading 42.8% below its 52-week high of $18.68 from February 2023. Investors who bought $1,000 worth of Domo's shares 5 years ago would now be looking at an investment worth $660.68.