UBS Remains Sidelined on New Relic (NEWR) as Challenges Overshadow 2Q Upside
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UBS maintained a Neutral rating on New Relic (NYSE: NEWR), and cut the price target to $38.00 (from $39.00), following the company's 2Q earnings report. NEWR reported Revenues and EPS upside of $1.5M and $0.07. However, these results are most likely overshadowed by billings down q/q for the 2nd consecutive quarter and deferred revenue down q/q for the first time ever.
Analyst Brent Thill commented, "NEWR delivered FQ2 Revenue/EPS upside of $1.5M/$0.07, but these results are likely overshadowed by billings down q/q for the 2nd consecutive qtr ($61.6M, +24% y/y vs. +39% in FQ1) and deferred revenue down q/q for the first time ever – a rare occurrence for a subscription model. We don't think these metrics capture the true story given the sizeable SMB portion of the business and short contract duration (~6 mos, in-line with FY16), but also note that with shares trading at ~6x EV/S on CY17e, the results are unlikely to sit well with investors. Despite these missteps, we still like the fundamentals - as NEWR is one of just a few modern horses in the APM race, and believe the move towards enterprise is also introducing a more pronounced seasonality into the business, with 1H17 focus on landing new customers (1H17 net adds +50% vs. 2H16) providing seeds for expansion into the back-half of the year. We expect to hear more at the analyst day session on Nov. 16th in SF."
Shares of New Relic closed at $34.36 yesterday.
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Create E-mail Alert Related CategoriesAnalyst Comments, Analyst EPS Change, Analyst EPS View, Analyst PT Change
Related EntitiesUBS, Earnings
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