AppFolio Inc: Cloud Stock Up 122% Since Market Correction on Strong Q1 Results

COVID-19 Fuels Stronger Demand for AppFolio Cloud Tech

AppFolio Inc (NASDAQ:APPF) has been thriving during the coronavirus pandemic, a time when many companies have been reporting abysmal financial results. In fact, the company recently reported strong first-quarter results.

AppFolio didn’t provide any guidance for fiscal 2020, citing uncertainty around COVID-19, but it is because of the pandemic that AppFolio remains an excellent long-term play.

If anything, the company’s software-as-a-service (SaaS) cloud offerings are the perfect panacea during an era of social distancing and office shutdowns.

The Goleta, California-based tech stock has been on a tear since the start of 2016 and has soared since bottoming in mid-March of this year. APPF stock is currently trading near record levels.

Some may see the company’s stock as being ripe for a correction, but its long-term trajectory and growth prospects suggest that AppFolio stock is just getting warmed up.

APPF Stock Overview

AppFolio is a software-as-a-service (SaaS) company that provides cloud-based software, services, and data analytics to under-served industries. (Source: “Cloud-based software built for specific verticals,” AppFolio Inc, last accessed July 2, 2020.)

The company’s software helps growing businesses in the real estate and legal industries more effectively market, manage, and grow their businesses. It helps them be more competitive during the current economic market, which might just permanently change the way businesses operate.

The company’s “AppFolio Property Manager” software helps property managers streamline their businesses. “Dynasty” provides artificial intelligence (AI) solutions for the real estate market and “MyCase” helps legal practices manage aspects like billing, contacts, calendars, documents, and time tracking.

Chart courtesy of StockCharts.com

Stock charts don’t get a lot prettier than the one above. AppFolio has been rewarding buy-and-hold investors during good times and bad. Since the beginning of 2016, AppFolio stock has soared more than 1,020%.

The company’s recent COVID-19-fueled gains have been impressive. At a time when many stocks are struggling to dig themselves out from the February/March sell-off, APPF stock has surged to record levels, up 55.9% year-over-year and up 46.8% year-to-date.

Between March 12, when AppFolio stock hit a low of $81.01, and June 5, when it hit a new 52-week high of $180.56, the stock has soared 122%. Currently trading at $164.73, it is up about 100% from its March lows.

Q1 Revenue Climbs 27%, Client Base Significantly Increases 

On May 4, AppFolio announced that its revenue for the first quarter ended March 31 increased 27% year-over-year to $72.5 million. (Source: “AppFolio, Inc. Announces First Quarter 2020 Financial Results,” AppFolio Inc, May 4, 2020.)

The company reported first-quarter net income of almost $2.0 million, or $0.06 per share, compared to first-quarter 2019 net income of $3.7 million, or $0.11 per share.

AppFolio ended the quarter with 14,729 real estate property manager customers managing 4.8 million units. This represents a 10% increase over the 13,409 customers it had in the first quarter of 2019 and an 18% increase over the 4.08 million units under management. (“Form 10-Q,” AppFolio Inc, May 4, 2020.)

In the legal vertical, APPF closed out the first quarter with 11,115 customers, a six percent increase from 10,485 in the first quarter of 2019.

The company ended the first quarter with a strong balance sheet, including $71.4 million in cash, cash equivalents, and investment securities, as well as and $97.4 million in total debt.

Analyst Take

As mentioned earlier, APPF stock has had great momentum since the start of 2016. That’s mainly because more and more businesses are turning to the cloud and are looking to manage their operations virtually.

Like every other year, AppFolio Inc entered 2020 with increased demand for its products. The unexpected COVID-19 pandemic has made the company’s SaaS offerings become even more in demand.

With the number of COVID-19 cases still rising in the U.S, chances are good that demand for AppFolio’s products and services will remain strong throughout the rest of 2020 and well into 2021.