LogMeIn (LOGM) shares have held steady after advancing sharply following last week’s earnings surprise, explains growth stock expert Hilary Kramer, editor of GameChangers.
The company's revenues grew 12% to $309.6 million, aided by the Jive Communications acquisition, and were $5.6 million more than expectations.
EPS of $1.40 vs. estimates of $1.16 were $0.05 above the high end of company expectations, as the company continues to see benefits from the cost savings of the acquisition of Citrix Systems’ (CTXS) GoToMeeting business.
What really moved the shares though was a significant improvement in renewal rate in the Communication and Collaboration business, which improved to 83% from 77.5% in the second quarter. More flexible payment plans and improvements in service are largely behind recovery.
In addition, the company is gaining significant traction from a bundled offering of GoToMeeting’s cloud-based video offering, and Jive’s cloud-based telephony solutions.
With approximately 20% of the company’s sales base realizing revenue growth of 35%, I believe estimates of revenue gains next year of 4% may be too conservative.
The company seems to be fixing the problems it is having in Communications and Collaboration, and if can just maintain share in that business, there is upside to next year’s EPS estimates of $5.80 a share.
LOGM remains a buy under $87.50. My $100 target is just 17X a 2019 EPS estimate that could have some upside.
