Here’s a term you might not be familiar with: “experience management.” This is a niche market that could become increasingly important in the digital economy, and Qualtrics International (NASDAQ:XM) operates in this sub-sector. So, let’s look deeper into the company and into XM stock.
What Qualtrics does, to put it simply, is develop software that uses deep customer insights to help businesses develop their brands and create better experiences for their customers.
I suppose you could call Qualtrics a leader in the experience management category. When businesses use Qualtrics’ products, the ultimate goal is typically to find out what the customers want and don’t want, attract them and retain them.
So, is this a lucrative business model? That’s the billion-dollar question for prospective investors, and we’ll try to uncover some answers.
For now, though, we’ll start off with a price analysis of the stock.
A Closer Look at XM Stock
On Jan. 28, 2021, InvestorPlace contributor William White reported on the initial public offering (IPO) for Qualtrics International.
Evidently, the company has established a share-price range between $27 and $29 for XM stock. Later, the IPO price was set at $30.
When the stock became available for public trading on the Nasdaq Exchange, it opened at $41.85 per share. Thus, it was already nearly 40% higher than the IPO price.
At the end of that first trading session, XM stock was $45.50, which meant that Qualtrics was now valued at $27.3 billion.
That momentum was maintained for a short while. By Feb. 4, the stock had reached a 52-week high of $57.28.
Next, however, was the start of a more challenging period for XM stockholders. The share price steadily declined over the ensuing weeks, landing at $33 on March 26.
Is this a problem, or an opportunity for enterprising investors? The answer depends on whether you believe Qualtrics International will generate strong returns – and the outlook does, indeed, appear to be quite encouraging.
A Stable of Stats
Start-up businesses can brag and boast all day long about being a niche market leader. Yet, without the numbers to back it up, it’s really just empty braggadocio.
Thankfully, Qualtrics International has a bevy of stats to support its position as a leading player in the experience-management software market:
- Clients include 13,000 of the world’s best brands – too many famous names to list here, so feel free to view the Qualtrics home page and see them for yourself
- 200 million users across more than 100 countries
- More than 85% of Fortune 100 companies use Qualtrics
- Over 100 millions actions triggered for the clients
- 633% return on investment (ROI) on the CustomerXM product
- CustomerXM features “27 channels and 128 data sources all feeding into one platform”
Moreover, Qualtrics was voted Leader in Enterprise Feedback Management by G2 in the spring of 2020.
With all of the foregoing in mind, it’s easy to see why Qualtrics International is often considered the go-to source for experience-management solutions.
Compelling Growth Story
But does any of this translate into robust revenues? The answer is definitely yes, and again there are numbers to back up the bull thesis.
For the company’s recently reported fourth fiscal quarter, Qualtrics recorded revenues of $213.6 million. That’s a 24% improvement over the $172.8 million from the year-ago quarter.
Not only that, but Qualtrics posted $160.4 million in quarterly subscription revenue for fourth-fiscal-quarter 2020. That represents a 33% increase over the $120.5 million from the comparable quarter of the prior year.
Qualtrics Chief Executive Zig Serafin offered a possible explanation for his company’s compelling growth story.
“We’re seeing two trends: Nearly everything is moving to digital, and our technology category is one of the fastest growing in software” with an addressable market of $60 billion, Serafin said.
The Bottom Line
With such a vast client base and fast-growing revenues, it’s natural to expect great things from Qualtrics International.
Nevertheless, Wall Street doesn’t necessarily seem to appreciate the company’s current and potential value. Therefore, I would definitely consider XM stock to be a strong buy.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.