There are instances of unfortunate timing, and one of them is when a cloud software company went public in September 2021, just before the tech industry collapsed due to the end of the pandemic-driven growth phase.
That is precisely what occurred. Amplitude ( AMPL -3.25% ) , a cloud-based software company specializing in digital product analytics, assists businesses in comprehending how customers interact with and utilize their products.
Amplitude made its first appearance on the platform. Nasdaq The stock market started at $50 per share and surged rapidly, eventually hitting a new closing high of $84.80 in November.
Nevertheless, similar to other companies in the industry, the profits were short-lived and the expansion came to a standstill as technology clients prioritized downsizing and cost-cutting, while consumers reverted to their spending patterns from before the pandemic.
Currently, the stock of Amplitude is trading at a low value, but it may be on the verge of a positive change after a challenging period. Let’s examine three factors that support this possibility.
Picture credit: Getty Images.
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Obstacles are starting to decrease.
Similar to other companies in the cloud software industry, Amplitude saw a high rate of customer turnover as the positive effects of the pandemic started to decrease.
Businesses miscalculated their software requirements during the remote work setup and reduced their software licenses by laying off employees or reducing their technology budgets in anticipation of an economic downturn that did not materialize. CEO Spenser Skates mentioned in an interview with The Motley Fool that the company experienced the loss of two major contracts, but has since moved past that setback, positioning itself for future business expansion.
Skates mentioned that the decline in contract renewals with enterprise clients happened earlier this year, and the company anticipates a boost in growth in the upcoming quarters and into the following year.
While the company projects minimal sequential growth in the third quarter, it has increased its revenue forecast for the entire year. The new forecast anticipates revenue between $294.5 million and $296.5 million, indicating a growth rate of 7%. This is higher than the previous range of $292.5 million to $295.5 million.
Search for an increase in Amplitude to exceed that guidance as an indication that momentum is once again gaining traction.
There is a new artificial intelligence feature.
AI AI is not progressing as quickly in the software industry as some investors desire, but Amplitude has discovered an alternative method to take advantage of the potential in AI.
Generative AI companies, such as Midjourney, specializing in image generation AI, and Character.ai, focusing on text-based generative AI chatbots, are showing interest in the project.
It is logical for those companies to choose to collaborate with Amplitude because they are encountering numerous digital interactions on a daily basis, ranging from thousands to even millions, which they need to examine in order to ensure they are effectively meeting their customers’ needs.
Within the last year, Character.ai partnered with Amplitude and has been experiencing rapid growth. Skates mentioned during the financial call that Amplitude was observing a significant impact from Character.ai, and also noted that Midjourney was showing similar growth. Character.ai has adopted Amplitude to improve its user onboarding process and to assist with the launch of its latest feature.
Additionally, Amplitude is creating its own AI assistant and search tool to assist customers. Its potential to benefit rapidly expanding generative AI platforms could become a key factor in driving the company’s growth.
The amplitude is top-notch.
Last week, Amplitude received a prestigious award for being recognized as the top leader in the Forrester Wave report focusing on feature management and experimentation solutions.
Amplitude outperformed eight other companies to win the title and scored the highest in 11 categories. Unlike some competitors that only provide point solutions in experimentation, Amplitude stands out for its seamless integration of experimentation and analytics, offering a comprehensive range of analytics products.
Skates emphasized that customers are looking for a comprehensive set of tools to enhance their product, including new features such as session replay, which enables companies to observe the exact actions users performed with their product. The CEO of Amplitude also expressed his belief that the report would assist the company in attracting additional business from potential clients.
Should we purchase the stock?
Amplitude’s recovery will not be immediate, but the significant drop in stock price suggests that a growth spurt could lead to a rapid increase in the stock value.
I am interested in more concrete proof in the data that indicates growth is beginning to rebound. However, I believe it is advisable to keep an eye on this stock in the upcoming quarters as there is a strong possibility that its value could increase twofold or more.
