On Friday, DA Davidson adjusted its outlook on DOMO (NASDAQ: DOMO), increasing the price target to $9 from the previous $8, while keeping a Neutral stance on the stock. This adjustment follows DOMO's third-quarter fiscal year 2025 earnings, which displayed steady subscription revenue growth and Non-GAAP operating profitability.
According to InvestingPro data, DOMO's stock is currently trading at $9.74, with a market capitalization of $376 million. The company has shown impressive momentum, with a 43% price return over the past six months.
The company's management highlighted positive signs in subscription growth, evidenced by subscription Remaining Performance Obligations (RPO) and extended contract lengths. They also noted that partner-led deals contributed significantly to the quarter's performance.
Despite these encouraging developments, DA Davidson expressed continued caution regarding DOMO's position in the market, especially when compared to the growing presence of cloud data platforms like Snowflake (NYSE:SNOW) and Databricks in the data stack, specifically within the business intelligence and analytics segments. InvestingPro analysis reveals several challenges, including short-term obligations exceeding liquid assets and a current ratio of 0.57, indicating potential liquidity concerns.
DOMO's third-quarter results were marked by their stable subscription revenue, a critical aspect of the company's business model, which provides a recurring income stream and reflects customer commitment. The company's ability to achieve Non-GAAP operating profitability was also a significant point in their quarterly financial report, indicating efficient management of expenses relative to revenue.
The company maintains a strong gross profit margin of 75.3%, though InvestingPro data shows it remains unprofitable over the last twelve months. For deeper insights into DOMO's financial health and future prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
The management's commentary about the positive indicators for subscription growth through RPO and contract lengths suggests that the company is not only retaining customers but also securing longer-term commitments, which is vital for predictable revenue. The mention of partner-led deals indicates a successful collaboration strategy that has helped DOMO in expanding its customer base in the quarter.
However, the competitive landscape in the business intelligence and analytics space is challenging, with Snowflake and Databricks making significant strides and gaining market share. This competition underscores the importance of DOMO's need to differentiate itself and strengthen its competitive positioning moving forward.
DA Davidson's revised price target to $9 reflects an incrementally more positive outlook on DOMO's financial performance and market strategy, yet the firm's neutral rating signals a cautious approach to the stock amidst a competitive industry landscape.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.