Fly News Breaks for February 5, 2020
Feb 5, 2020 | 08:35 EDT
As previously reported, Wedbush analyst Steve Koenig downgraded New Relic to Neutral from Outperform with a price target of $71, down from $79. The analyst says that the company's abrupt Q3 ramp in investments and reduction in free cash flow guidance look like "a harbinger of a dimmer medium-term profit outlook and jeopardy for FY23 operating and cash flow targets." The analyst notes that he has been "too optimistic" that the roll-out of the new products would help customers get comfortable enough with the roadmap to resume signing bigger APM expansion deals amidst a rapidly evolving "observability" market. It looks "increasingly clear" that new product adoption will take many quarters to become a significant contributor and he is "incrementally more cautious" on New Relic's path to margin expansion and to sustained ARR acceleration beyond the 19% targeted for fiscal year 2021.
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