Why Medallia Stock Is Surging Today

This post was originally published on this site

What happened

Shares of Medallia (NYSE: MDLA) jumped on Friday after a filing with the Securities and Exchange Commission disclosed that a director of the software-as-a-service company had bought a substantial number of shares. The stock was up about 21.5% at 11:55 a.m. EDT.

So what

Director Douglas Leone bought nearly 400,000 shares of Medallia between Sept. 10 and Sept. 11, paying around $11 million. Those purchases account for his entire direct stake in the company, although he has an indirect stake through Sequoia Capital, where he is the managing partner.

A rising chart.

Image source: Getty Images.

Shares of Medallia crashed on Monday along with many other cloud software stocks. Leone paid around $28 per share for his stake; the stock was trading close to $35 at the end of last week.

An insider buying shares, especially a substantial quantity, is often a sign that that insider has confidence that the stock is set to rise.

Now what

While this insider purchase has helped Medallia stock claw back some of its losses, the stock remains expensive. Medallia is now valued at roughly $3.9 billion, about 10 times the average analyst estimate for fiscal 2020 sales. The company is deeply unprofitable under generally accepted accounting principles, and revenue grew only 27% in its latest quarter. That’s not all that fast compared to other high-flying SaaS companies.

With the stock still sporting a generous valuation, more volatility could be ahead.

10 stocks we like better than Medallia Inc
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now… and Medallia Inc wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of June 1, 2019

Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of Medallia Inc. The Motley Fool has a disclosure policy.


Please enter your comment!
Please enter your name here