Can Domo Grow Its Subscription Revenues Faster Than Alteryx?

by Trefis Team
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After its recent IPO, Domo Technologies has attracted a lot of scrutiny due to its substantial cost base and operating losses. The company’s stock price is down nearly 15% since the IPO and its market cap is now around $600 million, much lower than its pre-IPO valuation of nearly $2.3 billion in its latest funding round in 2017 (Read Domo’s $2 Billion Valuation Looks Steep Given Its Operating Metrics, Intensely Competitive Industry).

Alteryx is one of Domo’s competitors in the business intelligence industry. Though both players are currently focused on different customer segments – Domo targets larger customers while Alteryx is focused more on mid-size businesses – given the competition and changing dynamics of the industry, they will likely see more overlap over time. In contrast to Domo’s valuation trends, Alteryx has a market cap of nearly $2.5 billion and its stock price has registered more than 150% growth since its first trading day in July of last year.

Our interactive dashboard examines the growth potential in revenues of Alteryx and Domo in the next few years. You can modify the numbers based on your assumptions to see the impact of changes in key drivers on the companies’ valuations.

We expect Alteryx to see higher growth in subscribers compared to Domo, though both companies are likely to grow at a steady pace based on historical trends. This is primarily because Alteryx’s target market is likely to be bigger – in terms of potential customers – as it is focused on the mid-market segment. The company also mentioned in its latest 10K that it is going to increase investments in sales and marketing to expand its customer base. Further, Alteryx has a high customer retention rate, indicating that existing customers are highly likely to renew their subscriptions in the future.

However, Domo will likely generate higher average revenue per subscriber, given its premium nature and target market of large enterprises.

While Domo is likely to grow its average subscription revenues at a steady pace, if Alteryx is able to maintain a steady growth rate in terms of total customers, Domo is unlikely to match Alteryx’s total subscription revenues in the next five years.

Domo is also facing a cash crunch with its high customer acquisition and sales and marketing costs (read A Closer Look At Domo’s Cash Burn). Even if the company is able to raise growth capital to fund the high customer acquisition costs, unless the company is able to grab market share from other players in the intensely competitive market, it is unlikely that Domo will be able to grow faster than Alteryx in the next few years.

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