Medallia Surges 70% Day 1, Is It Time to Put It On The Watch List?
Medallia, The San Francisco-based company, which focuses on software to monitor customer satisfaction surged more than 75% in its market debut on Friday, becoming the latest cloud software company to attract public market investors.
The IPO was initially priced at $21 per share but jumped above $35 per share mark soon after trading began. In its SEC filing on July 8, the company stated that it expected shares to price between $16 and $18. The stock climbed as high as $39.56 before closing at $37.05, giving it a market valuation of more than $4.5 billion.
Read more about Medallia’s IPO and its happenings on CNBC
Analyst Take: Medallia, while having one heck of an IPO, has been a relatively quiet entity in the wake of more publicized IPO’s over the past several months such as Uber, Lyft, Slack and Zoom. However, the day one success of the launch indicates that there is still a strong appetite for cloud companies that offer differentiation in a SaaS model. They key, of course, is in the recurring revenue, which is 79% of Medallia’s current business.
Medallia brings a diverse platform that focuses on cloud based SaaS solutions for customer experience management. The company touts its abilities across industries and a comprehensive capability to aggregate data from many structured and unstructured data sources to help its clients manage and improve the customer journey. This category is certainly not untapped, as the solutions find the product competing with portions of enterprise wide SaaS tools like Salesforce, Dynamics 365 and SAP C/4 (Now with Qualtrics), while also competing with experience platforms (Adobe comes to mind), data analytics and social monitoring tools like SAS, Qlick, IBM and Tibco for data analytics or the likes of Hootsuite or Sprout Social. The company is also promoting its wares in Contact Center making the likes of 8×8, Five9 and Cisco all technically competitors.
It’s worth mentioning that the company is also focused on ecosystem opportunities with their solutions in SaaS applications like Salesforce as well as the Azure Marketplace, albeit their wasn’t much indication of these partnerships being a significant route to customer for Medallia. Given the company’s solution enables companies to analyze data to empower customer relationships for account teams and call centers, I suspect the company uses its own capabilities for customer acquisition.
The company isn’t currently profitable, but I do like that it has at times in its path to IPO achieved profit. The influx of companies this year from Uber to Slack to the emerging WeWork that have no clear vision to reach profitability is alarming to me. Having said that, last year on their 313.6 Million in revenue last year, the company did lose over 70 Million meaning they have a long way to go before getting back to the black.
Right now, we are still in the early days for analytics, no matter how much we are discussing their importance to business. Usage is increasing significantly as compute, software and tools are making this possible. However, many organizations are fairly slow to adopt and will look to companies that can shorten the learning curve and/or provide a specialty analytic that is core to a specific line of business.
Personally, I have Medallia on my watch list. I want to see, now that the company is under more public scrutiny, how they perform in this crowded space, what customers they win and what differentiation they can tout from the rest of the analytics players from Experience Platforms to ERP to Contact Center. My initial impression is the company wins on a specific capability or two serving a vertical or department, but their portfolio shows width that could continue to make the company more instrumental to companies seeking to leverage data to improve CX and truly understand the modern customer journey.
Futurum Research provides industry research and analysis. These columns are for educational purposes only and should not be considered in any way investment advice.
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