JFrog (Nasdaq: FROG) is a complete, end-to-end platform for developers to achieve Continuous Software Release Management (CSRM). This allows software developers to make continuous updates to the software without any sort of downtime. This is a service that helps companies make more money given the tangible costs of the business coming to a halt due to software updates.
It also has additional useful, features like being able to test new features on a small portion of the audience before scaling it up to every user. Tools like JFrog have been internally developed at big tech companies like Amazon (Nasdaq: AMZN) and Facebook (Nasdaq: FB). Companies like JFrog offer this solution to the rest of the world as a SaaS product.
IPO
JFrog had a very successful debut. A month ago, shares were expected to go public between $34 and $38, however, due to strong price action for new debuts, shares opened at $44. On the first day of trading, the stock price hit $65 and has climbed to $75 in the first week of trading.
Based on its pricing, the company has a valuation of $5.7 billion. JFrog raised $356 million by selling 18.2 million shares.
Stock Price
JFrog has a very attractive business. It offers a useful product with obvious traction. Its revenue is growing 46%, and the company is expected to generate $155 million in revenue over the next twelve months. It also has an impressive net retention rate of 139% which means that it's keeping old customers very successfully, and they are increasing their spending.
JFrog has 5,800 users of this product, including 75% of the Fortune 500, as they added 200 new users at the end of 2019. It has a revenue growth of 65% and expects 50% more in the second half of 2020.
Some downsides are that it's overvalued by many metrics including price to sales which is above 50. It still is not profitable and warned that operating expenses will continue to increase substantially in "the foreseeable future".
So, it must continue growing above expectations to justify these multiples. It also faces a threat from existing cloud providers like Amazon (Nasdaq: AMZN), Microsoft (Nasdaq: MSFT), and Google (Nasdaq: GOOG) who could offer a similar product in their suite of cloud tools.