Smartsheet is the IBD Stock of the Day ahead of its first-quarter earnings report. The software maker has neared a cup-base buy point amid a 20% gain for SMAR stock in 2023.
On the stock market today, Smartsheet stock dipped 2.7% to 46.15.
Smartsheet competes in the work management market versus Asana and others. Asana reports first-quarter earnings on June 1. SMAR earnings are due June 7.
Investors may want to be cautious ahead of the earnings report. One strategy around earnings would be to use call options.
SMAR Stock: Technical View
From a technical view, Smartsheet stock has formed a cup base, with a traditional entry point of 49.09.
If it forms a handle, the SMAR stock entry point would be a bit lower at 48.80.
Companies use Smartsheet's products to manage workflows and projects, and facilitate collaboration.
"Smartsheet's vision is to help white-collar workers (accountants, attorneys, bankers, consultants, doctors, engineers, managers) automate processes to free up users' time and enable them to allocate more of their actual time to be creative and complete value-add work," Jefferies analyst Brent Thill said in a note to clients.
Customers for Bellevue, Wash.-based Smartsheet, founded in 2005, include 90 of the Fortune 100 companies and two-thirds of the Fortune 500.
Free Cash Flow Growth
Customer growth was a bright spot in fiscal 2023, Truist Securities analyst Terry Tillman said in his note to clients.
"The company also added 5 more customers to the $1 million-plus annual recurring revenue (ARR) cohort, bringing the cohort to 45 customers," Tillman said.
While Smartsheet competes in a crowded market, it has some good points for investors, SMAR stock analyst Jackson Ader from MoffettNathanson said in a recent note.
"Smartsheet differentiates itself from the other public players in the space," Ader said. "Smartsheet has reached the greatest scale overall and the complexity of deployment adds another layer of differentiation. On a financial metric basis, they have achieved the highest average revenue per customer and are the first to reach cash flow break-even on a fiscal year basis."
In fiscal 2024, analysts estimate that Smartsheet will generate $110 million in free cash flow, a profitability metric.
Further, Smartsheet reported adjusted earnings of 7 cents a share for the January quarter, up 158% from a year earlier. Revenue rose 35% to $212.3 million.
SMAR Stock: Billings Guidance
In addition, Smartsheet predicted fiscal 2024 billings growth of 20%, below consensus estimates. Billings are a sales growth metric. Most analysts called the billings guidance conservative amid worries the U.S. economy could weaken.
Meanwhile, SMAR stock holds an IBD Composite Rating of 96 out of a best possible 99, according to IBD Stock Checkup.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. Also, the best growth stocks have a Composite Rating of 90 or better.
Further, SMAR stock has an Accumulation/Distribution Rating of B. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. Its current rating indicates more funds are buying than selling.
The rating, on an A+ to E scale, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
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