A story of two firms: Domo’s inventory skyrocketed 21%, whereas Cloudera’s inventory dropped virtually 20%. Here is why Wall Road is paying shut consideration to each (DOMO, CLDR)

After Cloudera and Domo reported their quarterly earnings on Wednesday, each firms noticed dramatically completely different inventory actions the subsequent day. Domo, which makes a cloud software for monitoring enterprise data, noticed its inventory rise about 21% in buying and selling on Thursday. Shares of Cloudera, which makes software program for analyzing big quantities of data, dropped about 20%. Buyers are skeptical concerning the Cloudera-Hortonworks merger, however they're assured about Domo's new enterprise gross sales technique. Domo and Cloudera, two enterprise firms with out a lot else in widespread, reported their quarterly financials on Wednesday — and noticed dramatic inventory strikes the day after.  Cloudera, which makes software program for analyzing massive quantities of information, dipped virtually 20% on Thursday after reporting income effectively above Wall Road expectations, however disappointing future steering. Analysts had been watching this quarter particularly intently, because it was the primary report following Cloudera's merger with rival Hortonworks In the meantime, Domo, which helps enterprise maintain monitor of all of their metrics in a single place, beat expectations on income, and gave steering that was in-line with what analysts needed to see.  Analysts inform Enterprise Insider that Cloudera's tumble is an indication of the skepticism round its merger with Hortonworks, whereas they imagine that Domo's rising fortunes is an indication that its new gross sales technique is working. The Cloudera and Hortonworks merger Cloudera beat Wall Road estimates on Wednesday, reporting revenues of $144.5 million, versus estimates of $121.1 million. Nonetheless, Cloudera estimated income for the subsequent quarter of $187 million to $190 million, whereas analysts forecasted $189.9 million — proper on the high of that vary. For the 2020 fiscal yr, Wall Road is anticipating to see $851.87 million in revenues, which can also be in direction of the highest of Cloudera's new estimates of $835 million to $855 million. Cloudera and Hortonworks sealed the deal and formally merged in January, which implies that traders had been paying even nearer consideration to this report than regular, says Dan Ives, managing director of fairness analysis at Wedbush Securities. And when Cloudera reported disappointing steering, it "fanned the flames of these worries." Learn extra: Two public tech firms are about to merge, making a $5.2 billion knowledge processing large — and their inventory costs are hovering as excessive as 15% "Whenever you make an acquisition like this, these two firms combining, Hortonworks and Cloudera, within the first Three-6 months of an acquisition, all the things must be flawless within the eyes of the Road with a purpose to get confidence," Ives informed Enterprise Insider. "They undoubtedly stumbled over their shoelaces when it comes to steering. That is actually been the main focus of traders." Ives stated that it is doable that Cloudera was simply being conservative in its estimates, and Wall Road could also be fearful over nothing.  He is bullish on the merger of Cloudera and Hortonworks, because it is smart on paper and may very well be a significant step ahead — particularly in an period the place related instruments from the likes of Amazon Net Companies and Microsoft Azure are choosing up steam.  Nonetheless, he says, Cloudera have to execute significantly better subsequent quarter to show the naysayers flawed and present that the businesses are efficiently built-in.  "The knee-jerk response is a little bit of an overreaction," Ives stated. "With the intention to see the inventory transfer considerably larger, there's much more wooden to cut when it comes to gross sales acquisition and proving to the Road that it is a 1+1=Three acquisition and never 1+1=1.5." A better gross sales technique for Domo As for Domo, it reported quarterly revenues of $39.four million on Wednesday, beating Wall Road's predictions of $37.75 million. It additionally forecast revenues of $40 to $41 million for the subsequent quarter, in comparison with Wall Road's estimates of $40.four million, placing its steering proper in line.   For the complete 2020 fiscal yr, Domo predicts revenues of $173 million to $174 million, in comparison with Wall Road estimates of $173.86 million, additionally in keeping with expectations.  Domo's beat proves that its new gross sales plan is working, says J. Derrick Wooden, managing director at Cowen. Domo is a consumer of Cowen, in accordance with the agency's disclosures.  Earlier than, Domo was promoting to all types of companies, from small and medium-sized ones to main enterprises. It spent its assets on analysis and improvement to construct its platform, however the firm wasn't promoting and showcasing its merchandise accurately, he says.  This quarter, Domo lastly realized that its platform is best-suited for bigger enterprise clients, Wooden says.  Because of this, Domo coalesced over constructing a method focusing on these kind of firms, discovered to successfully promote to enterprises, and employed new gross sales management. "One factor they did was embrace the CIO within the gross sales cycle," Wooden informed Enterprise Insider. "They'll promote to advertising, they will promote to finance, however embracing the CIO on the similar time was getting them to assist clients understand the complete potential of the platform and the infinite use case potentialities across the platform." When Domo first went public final June, some specialists warned traders to remain away, citing its excessive spend on gross sales and advertising, amongst different components. However now, investor confidence in Domo seems to be rising. Learn extra: Domo went public and traders are biting however a watchdog warns 'steer clear of this IPO' Wooden says Domo will proceed to be promising. He says the analytics market appears to be like encouraging, and if Domo retains up with its technique, it "completely may be profitable" and speed up its income development. He says Domo is already planning to develop its gross sales group. "We predict all these distributors may be very profitable and Domo has a really distinctive platform with loads of know-how funding, so the product is there," Wooden stated. "It is only a matter of determining how one can promote it and how one can take it to market. That is the important thing to unlocking success and development and market share. That is the place we're seeing early indicators of enchancment." Be part of the dialog about this story » NOW WATCH: Amazon pays $zero in federal taxes this yr — this is how the $793 billion firm will get away with it