Sumo Logic (Nasdaq: SUMO) was started in 2010 by a group of engineers from ArcSight to help companies strengthen their business through real-time analytics delivered as a service. The most immediate application is through cybersecurity and awareness of any threats. Essentially, Sumo Logic helps companies squeeze more value out of their existing technology.
Machine learning and data analytics help companies optimize operations and make better choices. Unfortunately, these tools have only been available to big companies with massive resources. However, this is changing with a new generation of Software as a Service (SaaS) companies that are making these tools available to all businesses.
Sumo Logic's IPO
Sumo Logic went public last week, and it raised $326 million. The stock popped 30% on its first day of trading but has given back these gains in ensuing sessions. The stock opened at $22 which was above initial expectations of $17. This continues a recent trend of strength in high-growth software stocks.
Also, like these stocks, Sumo Logic has impressive revenue growth but is losing money. In the first six months of the year, the company generated $96 million in revenue which was as 38% increase from the first six months of 2019. It also lost $29 million in the first six months of the year as the company invests in improving its product and growth.
Stock Price Outlook
Sumo Logic is certainly an attractive stock despite its long runway to becoming profitable. The company should benefit from increased spending and investment in cloud computing and make these tools even more effective.
In its S-1 filing, Sumo Logic said that its goal is to help manage and reduce the complexity of the company's technology and cloud operations. It seeks to "enable organizations of all sizes to address the challenges and opportunities presented by digital transformation, modern applications, and cloud computing."
It does this by automating the collection and analysis of all the data that is generated across the business by its various tech to generate "actionable insights" in real-time. In its user testimonials, Sumo Logic's customers report that it helps them in monitoring and troubleshooting applications, software, and their cloud to prevent any disruptions.
Investors shouldn't rush out and buy the stock but wait for an attractive entry point. Sumo Logic has similarities with many other recent outperformers. It has enthusiastic and "sticky" customers. The product pays for itself and yields immediate results.