AppFolio Inc Gains 35% in 2019 and Just Formed a Golden Crossover

AppFolio Inc Gains 35% in 2019 and Just Formed a Golden Crossover
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AppFolio Inc Is Up 35% in 2019 and Just Got More Bullish

AppFolio Inc (NASDAQ:APPF) got off to a strong start in 2018, with its share price rallying 120%. The company reversed its winning ways, like the broader market did, in the last quarter of the year. It fared better than most though, ending 2018 up 42.6%.

In 2019, APPF stock has benefited from the prolonged January effect and is up 35% year-to-date. Not all of those gains are a result of wide-eyed investor optimism; in late February, the company reported strong year-end results. Thanks to two strategic acquisitions and a solid projection for 2019, the Santa Barbara, California-based software firm’s outlook for 2019 remains bullish.

AppFolio Inc Overview

AppFolio Inc is taking the cloud to the next level. The first iteration of cloud computing saw businesses move their data to the cloud, making it more accessible and available as a backup. The next wave of cloud computing is seeing brands like AppFolio target specific, underserved industries. (Source: “Corporate Overview,” AppFolio Inc, last accessed March 29, 2019.)

Some tech companies have to decide between quantity and quality. AppFolio goes for both. AppFolio provides cloud software to small and medium-sized businesses that operate in the property management and legal sectors.

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Both business groups have been largely ignored; or rather, small and medium-sized firms have been. Other cloud software firms have been busy trying to land enterprise-level companies.

The company’s “AppFolio Property Manager” software helps property managers streamline their businesses. Its “MyCase” software helps legal practices manage calendars, documents, time tracking, billing and collections, and share sensitive materials.

The company currently serves approximately 13,050 property manager customers and 10,300 small law firms.

AppFolio Inc Stock Information
Market Cap $2.7 billion
Beta 1.42
52-Week Change 94.69
52-Week High $91.49
52-Week Low $38.90
Shares Outstanding 15.83 million
Float 13.56 million
50-Day Moving Average $70.57
200-Day Moving Average $65.88
Percentage of Shares Shorted 1.96%

(Source: “AppFolio, Inc. (APPF),” Yahoo! Finance, last accessed March 28, 2019.)

APPF Stock

After consolidating for the first quarter of 2018, AppFolio’s share price trended significantly higher. By September, APPF stock had risen 120.5% year-to-date. Unfortunately, that momentum was quashed by the marketwide sell-off that dominated the fourth quarter.

Thanks to the January effect and investor optimism, AppFolio’s share price trended higher in the opening months of 2019. That momentum was buoyed by strong fourth-quarter and full-year 2018 results and a solid outlook.

While AppFolio’s share price is up 35% year-to-date at the time of writing, there is reason to believe additional gains are coming. APPF stock just formed a golden crossover—a bullish sign where the 50-day moving average crosses over the 200-day moving average, indicating additional moves to the upside.

Correlation is not causation, but AppFolio’s strong fundamentals do point to a bullish move.

Chart courtesy of StockCharts.com

AppFolio Inc Acquisitions

In September 2018, the company acquired WegoWise, Inc., a utility analytics software company with roughly 450 customers with 700,000 units.

WegoWise’s cloud software provides property managers with the information they need to help manage water, energy, gas, and oil use. (Source: “AppFolio Acquires Utility Analytics Company,” AppFolio Inc, September 4, 2018.)

In January 2019, AppFolio acquired Dynasty Marketplace, Inc., a leading provider of advanced artificial intelligence technology to the real estate market.

This acquisition strengthens AppFolio’s intelligence capabilities by automating leasing communications and replacing manual tasks, and allows for more accurate forecasting and revenue data. (Source: “AppFolio Acquires Advanced Artificial Intelligence Technology Provider,” AppFolio Inc, January 8, 2019.)

Full-Year Revenue Up 32%, Net Income Up 106%

On February 28, AppFolio announced its financial results for the fourth quarter and year ended December 31, 2019.

Fourth-quarter revenue came in at $50.4 million, a 33% increase over the $37.9 million recorded in the same prior-year period. (Source: “AppFolio, Inc. Announces Fourth Quarter and Fiscal Year 2018 Financial Results,” AppFolio Inc, February 28, 2019.)

Fourth-quarter net income was $2.6 million ($0.07 per diluted share), basically flat compared to the $2.5 million ($0.07 per diluted share) in the fourth quarter of 2017.

Included in these fourth-quarter results is $1.9 million of non-cash charges related to stock-based compensation and approximately $800,000 of net loss related to the company’s WegoWise legacy business.

In fiscal 2018, total revenue increased 32% year-over-year to $190.1 million from $143.8 million in 2017. Full-year net income was $20.0 million ($0.56 per share), a 106% increase over the $9.7 million ($0.28 per share) in fiscal 2017.

AppFolio ended 2018 with approximately 13,050 real estate property manager customers (managing 3.91 million units), up 11.5% from 11,700 customers (managing 3.25 million units) a year earlier. In the legal vertical, customer count increased 10% year-over-year to roughly 10,300. (Source: “AppFolio, Inc. (APPF) CEO Jason Randall on Q4 2018 Results – Earnings Call Transcript,” Seeking Alpha, February 28, 2019.)

AppFolio ended the year with $102.0 million in cash, cash equivalents and investment securities and $48.6 million of long-term debt. The company’s Board of Directors also announced a $100.0-million share repurchase program.

Looking ahead, AppFolio expects full-year revenue to be in the range of $250.0 million to $255.0 million. At the midpoint, that represents year-over-year growth of 33%. AppFolio Inc also expects its weighted average diluted shares for the full year to be approximately $36.0 million. (Source: AppFolio Inc, op cit.)

AppFolio will be announcing its first-quarter 2019 financial results in late April.

Analyst Take

AppFolio is a great tech company with a foothold in a niche industry.

It reported strong financial results throughout 2018 and had great momentum until the markets swooned in October. Since the start of 2019 though, it has experienced solid growth.

Thanks to strong demand for its products and two recent acquisitions, the company should continue to surprise investors to the upside in 2019.