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The Ratings Game: Samsara stock soars toward best day on record after earnings top estimates

Shares of Samsara Inc. surged toward their best day on record Friday after the maker of internet-of-things technologies topped expectations with its latest results and outlook, soothing macroeconomic fears.

Samsara
IOT,
+21.01%

late Thursday posted an adjusted loss per share of 2 cents, compared with a loss of 12 cents in the year-ago quarter, while analysts were anticipating a 6-cent loss. Revenue for the fiscal third quarter increased to $169.8 million from $113.8 million, whereas the FactSet consensus was for $155.3 million.

“Investors, over the last several months, have been worried that the end markets that Samsara serves are highly cyclical, and that might mean a significant slowdown in growth,” MoffettNathanson analyst Sterling Auty wrote in a note to clients Thursday. “But Samsara provides solutions to help companies more efficiently manage their fleets and operations. That means they are selling solutions that are typically funded out of operational budgets including operations, safety, and even insurance line items, rather than IT budgets.”

He added that these are “the types of projects that we expect to be prioritized during calendar 2023 when budgets are under significant scrutiny,” one reason why Samsara topped his expectations with its 49% revenue growth in the latest quarter.

The stock was up 18.9% in morning trading Friday and on track for its largest single-day percentage gain on record.

William Blair analyst Matthew Pfau suggested that Samsara was making the best of the current economic situation.

“The softening macro has continued to cause elongated sales cycles, at similar levels to last quarter, as some customers have needed higher levels of deal approval, longer trial periods, and intensified ROI [return-on-investment] validation,” he wrote. “However, demand and conversion remain strong.”

He rates the stock at outperform.

For the fiscal fourth quarter, executives at Samsara expect $170 million to $172 million in total revenue, along with an adjusted loss per share of 5 cents to 6 cents. Analysts tracked by FactSet were expecting $161.3 million in revenue and a 7-cent adjusted loss per share as of the end of November.

“Samsara remains one of the more interesting SMID-cap names in our coverage universe and we believe the shares have likely found a bottom given the continued outperformance and progress towards profitability,” Evercore ISI analyst Kirk Materne wrote in a note to clients, though he lowered his price target on the stock to $15 from $17 and kept an in-line rating.

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