MongoDB, Workday, DocuSign: which share price to back as SaaS post earnings?

It’s time for the Software-as-a-Service (SaaS) providers to report their latest earnings. Here are the top expected figures for MongoDB and DocuSign, and a review of Workday’s expectation-beating results.

MongoDB set to hold momentum

MongoDB [MDB], a database platform, reports its second-quarter earnings on 4 September. Zacks Investment Research – which is based on a survey of analysts - expects the firm to post a loss of $0.28 earnings per share, which nevertheless totals growth of 31.7% year-on-year.

Revenues are tipped to hit $91.27million – up 58.76% on last year - with customer numbers for its multi-cloud database service MongoDB Atlas expected to get a further lift, as businesses increasingly switch from rivals such as Oracle.

If these numbers are achieved it will give further bulwark to Mongo DB shares, which have already had a stellar 2019 soaring from $79.95 on 2 January to $152.31 on 30 August. The firm’s share price has risen 7.23% in the last month alone, far outpacing the computer and technology sector’s loss of 14%.

Jolyon Loo, writing on Seeking Alpha, sees a potential upside of 216% over the next 5 years to $452, as the ‘high growth disruptor’ benefits from accelerating business migration from on-premise to the cloud, and the explosion in apps development.

The firm is also developing new cloud services and features that “will provide a better way to work with data beyond the database”. Customers will create charts/graphs, build and share dashboards and embed them directly into web apps.

MongoDB share price vitals, Yahoo Finance, 3 September 2019

Consensus analyst estimates are more conservative, with Investing.com listing the average 12-month price target as $166.92 (with a high of $188) and CNN listing the median price target from 13 analysts as $180, representing an upside of 18% if hit.

All very positive but it’s worth noting this is still a company whose loss from operations stood at $30.6million in the first quarter of fiscal 2020 – compared with $26.7million a year earlier. Yes, it had net cash of $476m and revenues are on an upward path, but management will need to guard against mounting losses and any resulting downward pressure on the share price.

DocuSign seeks revenue rise

E-signature and digitalised agreement provider DocuSign [DOCU] hopes to record a revenue rise when it reports second-quarter 2020 earnings on 5 September.

Its shares dropped from $54 into the $40s after disappointing first-quarter figures showed a deceleration in customer growth – up 6.5% compared to 8% in the same period in 2019 – and billings – up 27%, down from 33%.

Management explained at the time this was the result of offering a broader suite of products, such as ID verification to customers which, in simple terms, meant agreements took longer to reach.

Any further signs of this growth slowdown in Q2 however, could put further pressure on the share price and raise questions about the long-term prospects for revenue growth in a sector – that comprises software giant Adobe – characterised by formidable competition.

However, analysts expect the company to report a year-on-year increase in earnings on higher revenues for the quarter. Zack expects $0.04 earnings per share, which would signal 33% year-on-year growth. Revenues are tipped to come in at $221.14 million, up 32.4%.

DocuSign share price vitals, Yahoo Finance, 3 September 2019

The stock has a consensus rating of ‘buy’ and a price target of $59.94. Much of the confidence behind that comes from DocuSign’s recent statement that its addressable market has doubled to $50billion, thanks to new product innovation. Its strong brand name is also a positive factor for the business and the stock.

Workday beats expectations

Workday [WDAY], the financial management and human capital management software vendor, published forecast-beating second-quarter results on Thursday 29 August. The firm also reported a 32% rise in revenues to $887.8m and a net income per diluted share of 44 cents, up from 31 cents last year.

This beat EPS expectations of 35 cents and a revenue estimate of $872.31m. In financial management, revenues grew 50%.

Subscription revenue came in at $757.2m, up 33.9% as the company managed to attract more Fortune 500 and Global 2000 firms from Rockwell Automation in the USA to Buntings in Asia Pacific.

Workday also pointed to its use of machine learning in its cloud offering; the latter enabling better monitoring of skills development and the detection of anomalies in financial management.

Taking heart from this innovation and its results beat, Workday now expects full fiscal-year 2020 revenue of between $3.58bn and $3.59bn, up from the previously guided range of between $3.55bn and $3.56bn. The firm also forecasted full-year 2020 subscription revenue of between $3.06bn and $3.07bn, and quarter three subscription revenue is forecast at between $783m and $785m.

Workday shares rose from $185.31 on 28 August to 187.65 after the results, but fell away on 30 August to around the $177 level. Perhaps some of that was profit taking or investor nerves around the impact of Brexit, combined with the US-China trade war’s impact on business investment.

Workday share price vitals, Yahoo Finance, 3 September 2019

Workday, though, played down any impact from these geopolitical events, and traders may be wiser to look at the gains WDAY stock has recorded so far this year, in spite of the cited macroeconomic headwinds – up 11% from $159.74.

Businesses are increasingly looking to cloud-based providers to manage their payroll and HR needs, and Workday is set to be a prime beneficiary of this shift.