Software Equity Group analyzed earnings reports of the top twenty companies by EV/Revenue in the SEG SaaS Index. Our goal was to compare the actual reported 4Q20 revenue data against the guidance provided in 3Q20. Further, we wanted to see how each company’s stock price would change the day after earnings, five days after, and then ten days after.
How Did These Companies Handle Revenue Guidance?
Of the twenty SaaS companies evaluated, 25% fall into the Dev Ops & IT Management product category, 20% are Communications and Collaboration, and 15% are Security. Thirteen companies met or exceeded revenue guidance, while the remaining seven companies that missed guidance include Coupa Software, CrowdStrike, DocuSign, Zoom Video Communications, MongoDB, Zscaler, and Okta. On average, the twenty companies exceeded analysts’ revenue guidance by 3.3%.
Twilio exceeded estimated revenue guidance by 20.5% in the fourth quarter. The Company focused on expanding its customer base, international expansion, and growth in the partner ecosystem. Twilio acquired Segment in Q4, combining customer data with its strong communications platform. According to The Motley Fool, Twilio closed some large enterprise deals with multiple leading firms, including JPMorgan, H&R Block, and Camping World. Compared to the rest of the group, Twilio estimates one of the largest increases in revenue from Q420 to 1Q21, projecting first-quarter revenue to grow nearly 17%.
On average, these companies increased 1Q21 revenue guidance 7% from 4Q20 revenue. The two companies that did not increase guidance were Shopify, and The Trade Desk, which decreased projections by 7% and 26%, respectively.
Stock Price Performance:
On average, the group’s stock price increased by 1.7% the day after 4Q20 earnings. Five days after 4Q20 earnings reports, the average company stock fell by 0.6%. Ten days post-earnings release, the average stock rose 1%. Coupa Software, which recently acquired travel optimization leader, Yapta, rebounded to gain 13.3% in stock price after an initial 2.9% decrease. The largest post-earnings release stock growth was MongoDB, which saw a rise of 33.2% in stock price in the ten days following third-quarter earnings.
The tracked twenty companies in the SEG SaaS Index achieved an average of $297.6M in 4Q20 revenue exceeding analysts’ revenue guidance by 3.3% for the fourth quarter. From our analyzed twenty companies, eighteen companies are expected to beat previously provided expectations for revenue guidance in 1Q21, showing continuing record growth.