Shares of New Relic (NEWR) have turbo-charged over the past 12 months, climbing 120%. The market ate New Relic’s dust as the S&P 500 index couldn’t keep up.
I believe shareholders will continue to enjoy further upsides as the company’s outlook seems promising as well. Thus, I am bullish on this stock. (See Analysts’ Top Stocks on TipRanks)
Based in San Francisco, California, New Relic provides a cloud-based platform with cutting-edge technologies that allow IT engineers to be efficient in developing software, overcoming the complexity of systems.
Fiscal Year 2022, Second-Quarter Results
In the second quarter of Fiscal Year 2022 ended September 30, the company made almost $196 million in total revenue, representing an 18% year-over-year increase. This was possible thanks to a rise in the most profitable active customer accounts. The turnover beat projections by $13.5 million.
Regarding the bottom line, there was a net loss per share of $0.10, better than what analysts were expecting, as they had forecast a net loss per share of $0.13. On a year-over-year basis, the net loss per share was $0.03 worse. This was due to higher operating expenses, especially for research and development activities.
A Solid Position in the Market
The market requires one specific thing from software developers. To accelerate innovation by creating ever-faster software that can process an increasing quantity of data.
However, this means that the systems are becoming more complex, surpassing developers’ abilities who must cope with a higher frequency of failures and anomalies during software operation.
These specialists need a work environment where they can keep up with technology. Specifically, they need analytics that enables them to understand the inner workings of the software because the slightest issue can potentially disrupt its stability. This is the concept of software observability.
In this sector, New Relic is positioned to satisfy the demand for real-time software observability through a large set of telemetry software data in one place, which is its platform.
From New Relic’s second-quarter report and its expectations going forward, it seems that the company can meet the need of IT engineers looking to develop the best possible software with the least amount of toil and cost.
Looking Ahead
For the third quarter of Fiscal Year 2022, the company expects revenue of $198 million to $202 million, up approximately 20.5% year-over-year. In addition, for Fiscal Year 2022, it targets revenue in the $778 million to $782 million range, up approximately 16.5% year-over-year.
Wall Street’s Take
In the past three months, nine Wall Street analysts have issued a 12-month price target for NEWR.
The average New Relic price target is $123.43, implying 2.6% upside potential. The company has a Moderate Buy consensus rating, based on five Buys and four Holds assigned.
Summary
Recently, New Relic has empowered software engineers with an open-source ecosystem for instant observability. Therefore, the company is more than ever in line with the market’s need of providing new features faster, reducing downtime as much as possible while solving issues before reaching customers.
Disclosure: At the time of publication, Alberto Abaterusso did not have a position in any of the securities mentioned in this article.
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