By Sam Boughedda
Domo, Inc. (NASDAQ:DOMO) was downgraded to Equal-Weight from Overweight, with its price target cut to $16 from $24 per share at Morgan Stanley on Friday.
Analysts there told investors in a research note that it is hard to find a catalyst with multiple headwinds ahead for the stock.
"After a sustained period of solid execution where growth sustained in the mid 20% and the company reached FCF positive status, we misjudged how quickly operational challenges that arose in FY23 have materially altered Domo's growth profile impacting its ability to accelerate profitability," wrote the analysts.
They added that recent sales challenges largely appear to be self-inflicted, as quota mismanagement led to a sharp reduction in sales capacity. However, they believe the issue going forward is that Domo's less-tenured sales force will likely face an even more challenging spending environment due to the tightening economic conditions.
Furthermore, the analysts said the pending departures of two long-time executives in Chief Financial Officer Bruce Felt and Chief Operating Officer Catherine Wong, "potentially create a dearth of experienced leadership to navigate Domo thru the current downturn."
"While valuation at 1.6x CY24 sales is undemanding, the prevailing sales capacity issues, executive departures, and increasingly challenging macro environment increase the risk of disruption and leave us with a lack of catalysts to maintain our OW rating," concluded the analysts.