Is Smartsheet Stock Going Higher?

Smartsheet is one of those companies with a cool name and arguably a cooler tool. It’s a cloud based technology that helps teams to work together via work management and automation systems.

That’s a fancy way of saying that it combines the simplicity of spreadsheets with real-time capabilities, such as integration with other tools and automated workflows.

The product has been such a hit that it’s featured in over 190 countries and territories and has a remarkable 85% penetration into Fortune 500 companies.

The range of customers spans those paying just $200 per share to those paying over $6 million annually, highlighting that its offerings aren’t just for small businesses or large enterprises but everything in between.

Typically customers begin using the platform for projects or processes before expanding horizontally by adding new applications and teams and vertically by incorporating more advanced and essential functions.

So, what does a great product mean for the stock? Is Smartsheet a business with potential to keep growing or are its glory days in the rearview mirror?

How Smartsheet Makes Sales

The company makes use of a blended go-to-market model to serve its user base in a cost-effective manner.

The cloud-based software platform is delivered globally using the subscription model while its digital sales approach involves self-service licensing and adoption through the website and a sales team using machine learning to promote offerings.

In addition, salespersons are employed to target enterprise clients and works with partners to expand customer reach, applications and markets. The company also taps into its existing customer base to grow in addition to leveraging re-sellers.

It’s also making strides abroad with international markets accounting for 16% of the company’s revenue in the fiscal year ending January 31st 2024. Plus, Smartsheet is expanding operations into government agencies and contractors.

Smartsheet vs Rivals

Smartsheet isn’t without its fair share of competent rivals that range from Airtable to Asana and from Atlassian to ClickUp. Even is a stiff competitor aiming to steal market share.

These competitors aren’t the only game in town either. Smartsheet has to fend off threats from both smaller startups focusing on specific technical challenges as well the big technology titans like Google and Microsoft, both of whom have the deep pockets to torpedo the company with targeted attacks.

Regardless, management remains confident in its offerings thanks to high quality enterprise features. 

Losses Grow But Tide Turning?

Since 2005, Smartsheet has reported ongoing losses. It continued that trend by announcing losses of $104.6 million in 2024, $215.6 million in 2023 and $171.1 million in 2022. The net result is an accumulated deficit of $862.8 million, as of January 31st 2024.

However recent financial figures suggest signs of improvement may be on the horizon. In Q1 2024 Smartsheet disclosed revenues of $256.9 million, showing a 21% rise year-over-year.

The growth was primarily driven by subscription revenue, which accounted for $244 million marking a 23% increase year-over-year.

During Q4 the net operating cash flow reached $59.7 million with cash flow totaling $56.3 million, an increase from $16.4 million in the corresponding period last year.

The quarterly net loss stood at $9 million, an improvement from $42.7 million in the year. On a GAAP basis net income surged to $47.1 million compared to $9.9 million in the previous quarter.

For the year Smartsheet’s total revenues amounted to $958.3 million, an increase of 25% from the preceding year. It also achieved a milestone of $1 billion in Annual Recurring Revenues.

Is Smartsheet Stock Going Higher?

A clear shift in bullish sentiment with 19 analysts revising their estimates upwards for the upcoming quarter suggests Smartsheet stock is going higher.

The analysts’ consensus view is that Smartsheet can rise to as high as $52.21 per share. That is very much in line with a discounted cash flow forecast analysis that puts fair value at around $51 per share.

Looking to the future, Smartsheet is well positioned to growth through its focus on AI and international expansion.

The company has allocated resources towards developing artificial intelligence features that enhance efficiency, creativity and scalability. Indeed, the scalability of its platform has laid a foundation for sustained growth.

With that said, the share price hasn’t reflected the opportunity ahead yet. It is down 5% year-to-date. That fall in share price may be a result of some deep-pocketed investors running away from lofty multiples. It currently trades at 6x sales, 9x book but has a negative price-to-earnings ratio.

Nonetheless, there is a lot to like about Smartsheet now. It has an abundance of cash on its balance sheet, net income is forecast to grow this year, gross margins remain high, and sentiment has largely shifted in its favor. When you put all those ingredients into the mix, the future is looking pretty rosy for Smartsheet shareholders.

The obvious drawbacks are the high multiples and lack of profitability over the past twelve months. So the bottom line is Smartsheet scores well on the dimensions of cash flow, growth and price momentum but comes up shy on profit health and relative value.

For those willing to bet on a company coming up trumps in the long-term and sacrificing profit short-term for growth long-term, Smartsheet may just fit the bill.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.