Sumo Logic (SUMO): Mixed Q2 Results Prompt Two Downgrades to Neutral, Shares Fall Over 10%
Shares of Sumo Logic (NASDAQ: SUMO) are down more than 10% in pre-open Friday after the company reported mixed Q2 results.
SUMO said it lost $0.11 per share, which is better compared to the market consensus of a loss of $0.14 per share. Sales for the quarter came in at $58.8 million to top the analyst consensus of $56.69 million.
“This quarter we saw continued momentum in our business as new and current customers adopt our Continuous Intelligence platform for a broad range of Observability and Security use cases. We will continue to invest in platform expansion and expanded routes to market to position us to capture the significant opportunity created by digital transformation and cloud migration,” said Ramin Sayar, president and CEO of Sumo Logic.
For the current quarter, the company projects a Q3 loss of $0.14, slightly better than the consensus for a loss of $0.15. Revenue for the quarter is seen at $60.80 million at the midpoint of the guidance, again better than the consensus of $60.05 million.
On a full-year basis, EPS is seen between negative $0.52 and $0.51, better than the consensus of negative $0.56. Revenue is projected in the range of $236.8 and $238.8 million, versus the consensus of $235.02 million.
At least two research firms downgraded shares of SUMO following Q2 results. BTIG analyst Gray Powell downgraded from Buy to Neutral.
Similarly, Piper Sandler analyst Rob Owens downgraded to Neutral from Overweight and hiked the price target to $25.00 per share from the prior $24.00.
“In an environment where software 'beats and raises' have become the norm, we are modestly lowering our forward expectations for core SUMO revenue for the second time in the past three quarters despite a revenue beat, with extended N.A. sales cycles and pressured net retention rates weighing on results. In turn, we are lowering our opinion on shares as well, as we would like to see improved execution and better overall growth rates (especially relative to the scale of the business) prior to getting more constructive on shares,” Owens said in a client note.
“While top-line performance beat in the Q and discussions around international momentum and customer adds were positive, weaker NRR and lowered guidance tell more of a mixed story. We acknowledge a broadening product suite that could support expansion deals and higher growth; while deceleration in 2H could reflect conservatism, we remain tentative given continued headwinds to growth at this scale,” Owens adds.
Cowen analyst J. Derrick Wood has maintained an Outperform rating but lowered the price target to $25.00 per share.