SVMK Inc: Up 70% from Lows, But Much More to Come

SurveyMonkey Inc (NASDAQ:SVMK) Up 70% from Lows But Much More to Come
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SVMK Stock: Accelerating Revenue Growth Implies Big Returns

Companies of all sizes are constantly on the search for ways to improve their digital presence and drive revenues higher. An intriguing mid-cap digital solutions company with strong upside potential is SVMK Inc (NASDAQ:SVMK), which launched its initial public offering at $12.00 in September 2018, trading as high as $20.00 on its first day.

SVMK stock subsequently collapsed to $10.05 on October 30 prior to staging an impressive 70% rally.

The company was known as SurveyMonkey Inc. before making the change to SVMK—which I have no idea how to pronounce—but rest assured, its outlook is promising.

SVMK provides a platform for companies to launch in-depth digital surveys that are comprehensive and developed by data scientists.

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The platform is used by over 17.5 million users and over 345,000 organizations worldwide.

The demand for attaining critical business intelligence will continue to rise and provide strong tailwinds for growth at SVMK Inc.

The following chart shows SVMK stock mounting an impressive rally from the December lows:

Chart courtesy of StockCharts.com

The stock is currently caught in a sideways channel bound by support around $16.00 and resistance at $18.50. A breakout could see SVMK stock break above $20.00 to new record highs.

Rising Revenues and Move Toward Profits to Boost SVMK Stock

The bull thesis behind SVMK stock is supported by a strong revenue picture, along with a move toward profitability in 2020. SVMK Inc has also been generating positive free cash flow (FCF).

From 2016 to 2018, SVMK ramped up its revenues from $207.3 million to $254.3 million, and the growth rate is estimated to rise.

Fiscal Year Revenue (Millions) Growth
2016 $207.3
2017 $218.8 5.5%
2018 $254.3 16.2%

(Source: “SVMK,” MarketWatch, last accessed May 29, 2019.)

SVMK is expected to increase its revenues by 18.6% to $301.6 million this year and by 19.8% to $361.5 million in 2020. (Source: “SVMK Inc. (SVMK),” Yahoo! Finance, last accessed May 29, 2019.)

The company delivered positive earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2016 and 2017 before recording a negative reading in 2018.

Fiscal Year EBITDA (Millions) Growth
2016 $26.9
2017 $22.4 -16.8%
2018 $75.8 -438.4%

(Source: MarketWatch, op cit.)

SVMK needs to work on its cost side and establish a path to profitability.

The following table shows the company’s generally accepted accounting principles (GAPP) diluted earnings per share (EPS):

Fiscal Year GAAP Diluted EPS Growth
2016 -$0.61
2017 -$0.19 68.5%
2018 -$1.43 -643.4%

(Source: Ibid.)

On an adjusted basis, SVMK Inc lost only $0.12 per diluted share in 2018. It’s estimated to slightly narrow this loss to $0.11 per diluted share this year and break even in 2020. (Source: Yahoo! Finance, op cit.)

As I mentioned earlier, SVMK is producing positive FCF, marked by triple-digit growth in 2017 and 2018.

Fiscal Year FCF (Millions) Growth
2016 $5.4
2017 $12.5 131.2%
2018 $34.9 178.4%

Analyst Take

The key for SVMK Inc will be its ability to continue to ramp up its revenues and move toward profitability, which should drive up its share price.

Valuation is not important at this stage for SVMK stock, as long as the company delivers on its fundamentals.