Investors may have rallied around SurveyMonkey’s initial public offering last week, but CNBC’s Jim Cramer has spotted some warning signs in his review of the company’s financials.
“Consider me skeptical,” the “Mad Money” host said on Monday. “While SurveyMonkey has a well-known brand, I worry that it might be a dinosaur.”
Founded in 1999, SurveyMonkey — which came public under its legal name, SVMK Inc. — is a leading provider of cloud-based software that simplifies the process of building and conducting online surveys. While it faces some competition from products like Alphabet’s Google Forms, it has held its own in the space, boasting some 600,000 paying customers as of the IPO.
SurveyMonkey’s financial results, however, tell a story counter to the stock’s slingshot IPO performance, Cramer said. In the first half of 2018, its revenue grew by 13.8 percent, a tepid growth rate compared with the fresh-faced tech IPOs Wall Street usually embraces.
“Don’t get me wrong, Wall Street loves accelerating revenue growth, but 14 percent? That’s not the stuff that dreams are made of,” the “Mad Money” host said.
Moreover, SurveyMonkey’s paid user growth was an “anemic” 3 percent for the first half of the year, and though the company has been around for almost two decades, it’s still losing money, Cramer warned. In 2017, the company lost $24 million, tagging on another $27.2 million loss just in the first half of 2018.
“This thing was a creation of the dotcom era. SurveyMonkey’s nearly 20 years old,” he said. “If SurveyMonkey were a person, it would be old enough to vote, so the fact that it’s not yet profitable is less than ideal.”
And while the company’s average revenue per user grew by 14 percent in the first half, it still wasn’t on par with the growth investors often expect from cloud-based market newcomers.
“SurveyMonkey’s not a cloud king. It’s not a cloud prince. It’s a cloud commoner,” Cramer said.
In Cramer’s view, SurveyMonkey’s only saving grace was Salesforce.com’s involvement in the IPO. The customer relations giant’s venture arm bought $40 million worth of SVMK’s stock at the $12 deal price.
“They know what they’re doing,” he said of Salesforce. “On the other hand, SurveyMonkey has a lot of financial red flags,” from its lukewarm paid user growth to its balance sheet to its widening profit losses, he continued.
Worse, SVMK’s current valuation makes the stock more expensive than the faster-growing Dropbox and just a cut below Splunk, a Cramer-anointed cloud king, which the “Mad Money” host worried could mislead investors.
“Look, I like SurveyMonkey … the product, but I can’t justify buying SurveyMonkey the stock,” he said. “Sure, Salesforce bought a huge slug of stock in this thing, but they did it at $12 a share. If SurveyMonkey pulls back to those levels, we can revisit it. For now, though, I’d say steer clear.”
Disclosure: Cramer’s charitable trust owns shares of Alphabet and Salesforce.
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