Collaborative Work Platform Should Continue to Thrive in Q2 Amid Hybrid Environment
Smartsheet (SMAR) reporting earnings on Tuesday after the close with the Street looking for a $0.13 loss on $125.47M. Next quarter is guided to an $0.11 loss on $129.94M while the FY is a $0.39 loss and $514M. SMAR has traded lower in five of the last eight reports with an average closing move of 6.5% and a max move of 22.99%. The current implied move is 9.72%. The $10.05B company trades 18.5X EV/sales with high-20% growth. SMAR provides cloud-based platform for collaborative work including planning, automating, and reporting on work and should continue to thrive given the pushback in ‘return to office’ and more use of hybrid work environments. They saw ACV grow 40% in Q1 with revenue up over 37%. The company has been seeing strong enterprise adoption and also expanding their government business with expansions in GSA, NASA, and the VA. Analysts have an average target for shares of $77.50 and Street High $90. Jefferies upgrading to Buy on 8/19 citing their positioning as a low cost, high value work collaboration solution that should thrive in a work from home environment. SMAR’s large opportunity is just coming to fruition with paid seats representing only 10 basis points of the 1.25B knowledge worker. Short interest is 3.45% and down from around 14% in mid-2020. Hedge fund ownership fell 7% last quarter. Point72 a buyer of 1.38M shares. Whale Rock Capital sold their entire 3.5M share position. SMAR is near a big weekly breakout above the February highs and a measured move to $115 and continuation of the long-term trend. MACD and RSI are not close to being overbought on the longer-term timeframes, so plenty of room to run. SMAR has seen mostly bullish flows out in January 2022 and January 2023 expirations but did see a buyer of 3,500 September $75 puts on 9/2 for more than $840K.