After the popular IPO in early 2021, is it possible to buy Qualtrics stock now?

After being popular at the beginning of the year, quality (Nasdaq stock code: XM) Since its IPO in January 2021, the current stock price has fallen by 4%, while it has risen by 14% over the same period Standard & Poor’s 500 Index In the same time span. This underperformance is not uncommon for IPO stocks, but it hides a noteworthy growth story in Qualtrics. As organizations scramble to upgrade their operations to adapt to the cloud era, this digital experience management software company is setting off a wave. Is it time to buy now?

The only public stock of experience management

Experience management software is becoming an increasingly important tool in the toolbox of the business world. With so much communication shifting to digital formats—whether between employees and companies, their customers, and other stakeholders—capturing these interactions and learning from them is the key to success.

Enter Qualtrics, which can help organizations research and implement various digital interactions. However, this is not just an analysis platform. It can also help with research, digital product design changes, marketing decisions, etc.

This makes sense. Interpersonal interaction is the root of our daily work, so Qualtrics’ software can be integrated into various business sectors in various sectors of the economy. “Listen, understand and take action” sums up the market segment of experience management software very well.

Of course, Qualtrics is not alone in the experience management department.But according to technical researchers GartnerQualtrics is close to the best of its kind in terms of the integrity of its platform and the ability to execute its vision. medal (NYSE: MDLA) Is another leader in this field, but it was acquired by private equity firm Thoma Bravo. This makes Qualtrics the first choice in this type of software, although there are other companies doing similar things, such as the recent “digital optimization” software IPO amplitude (NASDAQ: AMPL).

However, from a purely financial growth perspective, Qualtrics’ numbers stand out. Revenue for the full year of 2020 increased by 29% to US$764 million, and the company’s sales in the first half of 2021 increased by 37% year-on-year to US$488 million. Based on the guidance of annual revenue of approximately US$1.1 billion, management expects to grow by approximately 32% in 2021.

Qualtrics has also recently turned to areas where free cash flow is positive, generating $53.7 million in the second quarter of 2021 (a very healthy free cash flow margin of 22%).The stock price has traded at approximately 24 times the sales in the past 12 months-this is not so-called “cheap”, but if Qualtrics can continue to expand by a double-digit percentage, then it may be a long-term value with Create huge profits along the way.

A potential problem prevents it from becoming the first choice

Before considering Qualtrics, there is one important thing to note: sap (NYSE code: SAP)The German multinational software giant acquired Qualtrics in 2018 (under the leadership of then CEO Bill McDermott, he is now Serve immediately) And decided to hold a majority stake in the company during the IPO at the beginning of this year (approximately 80% of Qualtrics is still owned by SAP). The rapid transition from acquisition to partial spin-off may just be a way to improve Qualtrics’ cash position as it attempts to double the demand for cloud computing.

In fact, Qualtrics has a considerable war fund. By the end of June, it reported that the bank’s cash and equivalents were US$635 million, compared with US$204 million a year ago (before public trading). However, SAP did transfer $503 million in debt for Qualtrics.

However, it is still in a positive net cash position, and if Qualtrics maintains positive free cash flow from now on, its liquidity inventory will grow further. However, since SAP may still be manipulated behind the scenes (at least to some extent), Qualtrics may not be able to fully control its own destiny. SAP is trying to manage the migration of its own operations and its products to a more modern cloud-centric model. Its interests may not be entirely consistent with the interests of other Qualtrics shareholders.

Once again, it may be a good long-term situation for Qualtrics to gain some freedom to go its own way, and its execution since the IPO is promising. However, there are many outstanding cloud stocks showing similar performance, but there is no legacy software overlord with majority control.

However, at least, I think Qualtrics stock is worth watching, especially since it is now the only publicly traded leader in the rapidly growing field of experience management.