Samsara (IOT): Time to Buy Half
We are going to front the March Issue by a couple weeks and officially add a half stake in Samsara (IOT) to the portfolio today. The stock has been on our Watch List since February 15 and yesterday’s earnings report is good enough to push IOT into the buy column.
I will recap the earnings report and big-picture thesis in the March Issue (assuming IOT continues to do well enough over the next two weeks), but for now the punchline is that Samsara beat on both the top and bottom lines, and issued 2023 guidance ahead of consensus. Revenue was up 48.3% to $186.6 million (beating by $150 million) while adjusted EPS of -$0.02 beat by $0.03. Full-year revenue guidance of $838 - $848 million compares favorably to $820.8 million consensus.
Samsara landed a couple of major deals with Nutrien (agricultural company) and Estes (transportation company) while also making progress in the public sector, adding State Department of Transportation to an existing account. While management noted macro uncertainty in the year ahead, the clear return on investment (ROI) for Samsara’s solutions makes a compelling argument for customers, even if they need a little extra handholding to sign up (management noted elongated sales cycles).
Bottom line: This wasn’t a perfect quarter. But the story is good enough, with upside potential for us to dip one foot into an opportunity that could get significantly better.
I expect the stock will trade up today given a small pre-market uptick. The summer 2021 high of 17.49 is right overhead, however (stock closed at 16.88 yesterday). That accounts for my half-position thinking – it’s a toss-up whether IOT will blast through that today or get stopped. A half position gives us some flexibility. BUY HALF
