JFrog Ltd.

FROG Details

JFrog Ltd. (NASDAQ: FROG) provides a global DevOps platform for continuous software release management (CSRM). Organizations use the CSRM platform to deploy software updates to any machine continuously. Self-managed subscriptions and licenses, including licenses, support, and upgrades and updates as they become available. SaaS subscriptions, which provide customers access to FROG's most recent managed version of its product hosted in the cloud, generate money for the company. As of November 05, 2021, FROG's market capitalization stood at USD 3.40 billion.

Latest News:

• Authorized as a CNA: On October 04, 2021, FROG stated that it had been recognized as a CVE Numbering Authority (CNA) by the CVE Program. This accreditation enables FROG to work with the worldwide security community to improve threat detection while offering JFrog Xray clients the most up-to-date vulnerability information and distinct remedial data.
• Accredited by Iron Bank: FROG announced on September 20, 2021, that its JFrog Artifactory and JFrog Xray solutions have been authorized by Iron Bank and are now available through its Platform One.

9MFY21 Results:

• Boost in Revenues: FROG witnessed a sharp 36.35% uptick in its total subscription revenue to USD 147.45 million during 9MFY21 (ended September 30, 2021) compared to USD 108.14 million during 9MFY20, attributable to new customers and growth in revenues from existing customers.
• Increase in Net Losses: The company recorded net losses of USD 41.51 million during 9MFY21 vs. USD 5.69 million during 9MFY20.
• Healthy Balance Sheet: As of September 30, 2021, the company had cash and cash equivalents (including short-term investments) of USD 402.38 million and no outstanding debt.

Key Risks:

• Shareholding Concentration Risk: As of December 31, 2020, FROG's executive officers, directors, 5% or more shareholders, and associated companies owned approximately 64% of the common shares outstanding. Due to this concentration of ownership and voting power, minority shareholders' ability to influence corporate activities may be constrained.

Outlook:

• Q4FY21 Estimates: As of November 04, 2021, the firm anticipates generating USD 57.5 – 58.5 million in sales for Q4FY21, with a non-GAAP operating income of USD 0.1 – 1.0 million. It also expects non-GAAP net income per share of USD 0.00 to USD 0.01, based on 104 million weighted average shares outstanding.
• FY21 Guidance: FROG anticipates USD 205 – 206 million revenues in FY21, with a non-GAAP operating income of USD 4.2 – 5.2 million. It also forecasts its non-GAAP net income per share to range between USD 0.04 and USD 0.05, based on 104 million weighted average shares outstanding.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

FROG Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

FROG's stock price has surged 15.51% in the past week and is currently trading at the lower-band of the 52-week range of USD 31.17 to USD 73.61. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 68.14. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 37.00.

Considering the significant uptick in the stock price in a short span and other technical indicators, we believe the decent business fundamentals are adequately reflected at the current trading levels. Hence, we recommend a "Sell" rating on the stock at the closing price of USD 39.02, up 10.07% as of November 05, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.