Weak guidance doesn’t tell the whole story for these two stocks

Every earnings season has its winners and losers. In most cases, actual earnings do not matter as much as forward-looking guidance. There are numerous instances of stocks reporting strong earnings per share and revenue, but weak or bearish forecasts are all the markets hear when stocks are taken to the woodshed.

Among these titles, there are only a few that are worth taking a second look at. Keep in mind that some companies may intentionally lower forward guidance to produce an even stronger pace when they report. Here are two companies in the computer and technology sector that produced strong earnings results, but weak guidance caused shares of each stock to plummet.

Smartsheet Inc.

Smartsheet Inc. NYSE: SMAR is a cloud-based workflow collaboration platform that enables teams and individuals to collaborate, plan, and execute projects more effectively. Its project management platform lets you create tasks, assign them, collaborate, and track progress in real time. Features like document sharing, inline comments, and discussions help keep members on the same page.

Smartsheet also enables process automation, which helps users save time and reduce errors when performing repeatable tasks. While Smartsheet primarily serves small and medium-sized businesses, the company has expanded and grown its customers with annual recurring revenue (ARR) of $100,000 or more to 2,000 customers. The company competes with Asana Inc. NYSE: ASAN AND Atlassian Co. NASDAQ: TEAM.

Platform features that enable remote working

Users can set up automatic notifications, conditional formatting, and triggers. Various reporting tools measure progress and perform data analysis. The platform is scalable, customizable, and features mobile access and integration with popular business programs. The company benefits from the secular trend toward remote work and the elastic office as workers still need a virtual space to collaborate.

EPS beats as revenue rises 21%

Smartsheet reported fiscal fourth-quarter 2024 earnings per share of 34 cents, beating analysts’ estimates of 18 cents by 16 cents. GAAP net loss was $9 million compared to $44.4 million in the prior-year period. Revenue increased 21% year-over-year to $256.9 million versus analysts’ consensus estimates of $255.2 million. The company ended the year with $628.8 million in cash and cash equivalents. Obtain AI-powered insights on MarketBeat.

Smartsheet offered mixed guidance

Smartsheet gave mixed guidance for first-quarter 2025 EPS of 26 cents to 27 cents, beating analysts’ consensus estimates of 20 cents. Revenue is expected to be in the range of $257 million to $259 million, below the consensus estimate of $263.34 million. Full-year fiscal 2025 EPS is expected to be between $1.06 and $1.13, better than the consensus estimate of 93 cents. Revenue is expected to be in the range of $1.113 billion to $1.118 billion, compared to the consensus estimate of $1.14 billion.

Mark Mader, CEO of Smartsheet, commented: “Strong demand from our enterprise customers helped us reach the milestone of $1 billion in annualized recurring revenue in the fourth quarter,” said Mark Mader, CEO of Smartsheet. “As we look ahead, we are laying the foundation for the next era of profitable growth with proven, more efficient go-to-market initiatives paired with enterprise-grade product innovations based on decades of data, working models and use cases of customers.”

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Daily descending triangle

The daily candlestick chart on SMAR illustrates a descending triangle pattern. The descending trendline started at $48.35 on February 9, 2024. SMAR fell to the flat-bottomed lower trendline of $40.02. Shares fell through the lower trend line on the earnings release to $35.52, but recovered to regain lower trend line support at $39.24. The daily relative strength index is reported at the 40 band. The pullback support levels are at $37.51, $35.52, $32.87 and $30.33.

Pager

PagerDuty Inc. NYSE: PD is a cloud-based incident monitoring and management platform. The platform monitors an organization’s IT infrastructure and applications, triggering real-time incident alerts. Alerts may be routed to appropriate personnel based on urgency. Enable robust features and integrations designed to focus on incident management. The platform also provides tools to identify root causes and analyze incident trends to better prepare for future responses. The platform focuses on collaboration between different teams to drive faster resolutions.

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Fiscal results stable in the fourth quarter of 2024

PagerDuty reported fiscal fourth-quarter 2024 earnings per share of 17 cents, beating analysts’ consensus estimates of 15 cents by 2 cents. GAAP operating loss was $33.4 million and non-GAAP operating income was $11 million. Revenue increased 10.1% year-over-year to $111.12 million versus consensus estimates of $110.69 million. Annual recurring revenue (ARR) increased 10% year over year to $451.9 million. Customers with ARR greater than $100.00 increased to 804, up from 752 in the year-ago period. Customers with ARR greater than $1,000,000 increased to 57, up from 50 in the same period a year ago.

Forward guide lowered

PagerDuty provided downward forward guidance for fiscal first-quarter 2025 EPS of 12 cents to 13 cents versus consensus estimates of 18 cents. Expected revenues are between $110.5 million and $112.5 million versus $113.86 million. Full-year fiscal 2025 EPS is expected between 65 and 70 cents versus consensus estimates of 82 cents. Expected revenues are between $470 million and $478 million versus $482.46 million.

Jennifer Tejada, CEO of PagerDuty, commented: “While the volatile economic environment was challenging during fiscal ’24, we emerged stronger, more profitable and well-poised to accelerate growth during fiscal ’25.” Tejada continued: “Our confidence is based on improving leading indicators such as large deal pipeline and conversion rates, stabilizing mid-market and enterprise customer retention, a greater mix of multi-product and multi-year additions and expansions and improving sales productivity.”

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Daily descending triangle

The daily PD candlestick chart illustrates a descending triangle pattern. The descending trendline formed at a high of $26.70 on January 12, 2024. PD fell to the flat-bottomed lower trendline at $22.38 while forming lower highs on rebounds. PD initially collapsed through the triangle base following the release of fiscal Q4 2024 earnings to $20.35, but rebounded to the $23.83 descending trendline before retesting the bottom trendline dish. The daily RSI is stuck below the 50 band. Pullback support levels are at $21.17, $20.35, $19.51, and $19.18.

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