Qualtrics IPO Is Coming Soon, Stock Looks Promising

On Jan. 19, Qualtrics revealed the terms for its IPO. The company plans to raise $1.2 billion in the offering. The stock is set to debut on the Nasdaq Exchange under the ticker symbol “XM.” Is Qualtrics IPO stock a good buy for investors?

Qualtrics was acquired by SAP SE two years ago for nearly $8 billion just before the company’s planned IPO. Founded in 2002, Qualtrics sells software that enables companies to measure customers’ experiences so they can improve their product offerings. SAP will likely remain the controlling owner with nearly 80 percent of the outstanding shares at the closing. As of 10:58 a.m. ET on Jan. 21, SAP stock was down 0.1 percent at $127.51.

Qualtrics hasn’t disclosed an IPO date yet, but several reports indicate that it could come as early as next week. The company plans to offer 49.2 million shares, which will likely be priced between $22 and $26 per share. In Qualtrics' IPO filing, it said that private equity firm Silver Lake is acquiring a 4 percent stake for $550 million. The company’s founder, Ryan Smith, will likely be the largest individual shareholder with nearly 6 million shares. Smith is also acquiring a 1 percent stake in the company for $120 million.

Morgan Stanley, J.P. Morgan, Deutsche Bank Securities, Goldman Sachs, HSBC, BofA Securities, Barclays, Citigroup, BMO Capital Markets, and Truist Securities are the listed underwriters for the offering.

If Qualtrics prices its IPO at the midpoint of the suggested range, the company would have a market value of about $12.6 billion. Subscription software companies like Zoom, Twilio, and Datadog more than doubled in value last year. Snowflake, a cloud data storage vendor, is valued at $80 billion.

Qualtrics isn't profitable yet. The company doesn't expect to achieve profitability in 2020 or in future periods. The cloud storage vendor reported a net loss of $258.9 million in the first nine months of 2020 compared to a net loss of $860.4 million in the first nine months of 2019. Qualtrics’ revenues in the first nine months of 2020 rose by 31.5 percent YoY to $550 million.

Qualtrics plans to take advantage of the rising demand for high-growth cloud software vendor companies. The company’s operations have gained traction. Businesses are spending on remote work tools and services amid the coronavirus pandemic. In Qualtrics' IPO filing, it said that the total addressable market is around $60 billion.

In 2019, Qualtrics’s revenues increased by 47.1 percent YoY to $591.2 million. The IPO terms put the company’s 2019 price-to-sales multiple at 21.3x, which looks attractive compared to other software companies. Based on the rising sales for software companies, XM could be a good way to play the space.

Zoom Video Communications CFO Kelly Steckelberg and Silver Lake co-CEO Egon Durban are joining Qualtrics' board.