Stock Story -
What Happened: Shares of advertising data platform LiveRamp (NYSE:RAMP) jumped 17.1% in the pre-market session after the company reported first-quarter results that exceeded analysts' revenue expectations. The topline benefitted from the completion of the acquisition of Habu, which contributed $2m to revenues during the quarter. In addition, the company called out a "stronger-than-expected digital advertising market." Moreover, the company's strategy to focus more on large customers seems to be working out nicely, as it added 10 new $1 million plus subscription customers. This partly offset weaknesses stemming from longer sales cycles and softness with smaller ACV customers observed during the quarter.
Moving on, next quarter's revenue guidance came in higher than Wall Street's estimates. Overall, we think this was a strong quarter that should satisfy shareholders.
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What is the market telling us: LiveRamp's shares are quite volatile and over the last year have had 10 moves greater than 5%. But moves this big are very rare even for LiveRamp 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 7 months ago, when the stock gained 14.3% on the news that the company reported third-quarter results that beat on key line items like revenue, adjusted operating profit, and adjusted EPS. We were also impressed by LiveRamp's strong gross margin improvement this quarter and its increase in net revenue retention. The company cited a stronger-than-expected digital advertising market and a stable selling environment as tailwinds. This is despite some companies saying that the digital advertising backdrop is a bit shaky due to macro and geopolitical uncertainty. The major positive is that guidance was strong and full year guidance, in particular, was raised across the board.
On the other hand, direct subscription customers (a number that decreased year on year) fell below expectations, and the company continued to observe an average deal cycle that remained about a quarter longer than the levels observed in the previous year.
Zooming out, we think this was a great quarter, showing that the company is staying on track.
LiveRamp is down 6.6% since the beginning of the year, and at $34.70 per share it is trading 17.3% below its 52-week high of $41.96 from February 2024. Investors who bought $1,000 worth of LiveRamp's shares 5 years ago would now be looking at an investment worth $633.95.
