Entering text into the input field will update the search result below

New Relic: AIOps And Edge Will Drive Client-Base Expansion

Jun. 10, 2020 3:19 PM ETNew Relic, Inc. (NEWR)2 Comments
Tech and Growth profile picture
Tech and Growth


  • We see growth opportunities through client-base expansion, driven by the adoption of New Relic Edge and AI in FY 2021 and beyond.
  • New Relic also onboarded four new executives, demonstrating a full commitment to fixing the sales execution issue in Q1 2020.
  • As we see potential growth and margin expansion opportunity in the medium term, we are upgrading our neutral rating to overweight.


In our recent note on New Relic (NYSE:NEWR) in Q1 2020 last September, we highlighted the potential investment risk considering the management shakeup in the company. We rated the stock neutral at the time as we continued to believe in the business's potential and strong positioning in the attractive APM (Application Performance Monitoring) and observability spaces. New Relic has since continued to perform above our expectations, which increases our conviction in the stock further.

In Q4, New Relic beat the guidance as it grew revenue by 21% YoY and announced new executive hires to strengthen its leadership team. The company also introduced two new offerings, which demonstrates its commitment to continue investing in its platform despite the ongoing macro uncertainties that have reduced the visibility for the full year. The stock has only been up ~7.5% from last September when we published our first coverage. As such, the price level provides a good entry point and we are upgrading the stock to overweight.


We have a long-term bullish view of New Relic, which we think will continue to be a dominant player in the APM and observability spaces. There are two key catalysts we have identified as of Q4:

We expect a client-base expansion growth opportunity through continuous R&D investments in AIOps and Edge technologies. Throughout FY 2020, the company has been tweaking and improving its New Relic AI offering, which reportedly came out of the successful beta phase in Q4. The newly-launched New Relic Edge in Q4 is also a differentiated offering that complements AI. We expect the combination of AI and Edge to drive top-line growth, primarily through strong client base expansion.

(Source: company's earnings call slide)

By having AI, New Relic now has the right asset to enter the AIOps (AI for IT Operations) category and a more

This article was written by

Tech and Growth profile picture
Former tech operator, entrepreneur, and venture capitalist with over a decade of experience starting, investing, and building companies in Asia and US. Long-only manager seeking multi-asset technology / growth opportunities driving disruptive innovation globally.

Analyst’s Disclosure: I am/we are long NEWR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (2)

21 Jun. 2020
New Relic is late in the AI/AIOps space and their offering is recycled legacy event management approach. The fact that they charge for AI is telling of legacy architecture with an after though approach that is unlikely to benefit their customers.

The edge offering is also an afterthought that is mainly trying to address scalability issues within the tracing architecture. They have been trying to adopt the new Distributed Tracing and their existing cloud architecture just will not work large scale environments.

I do thing though that the price is somewhat low compared to their revenue but their future with the highly competitive environment doesn’t look positive long term.
I think New Relic, Solarwinds and others are targeting a legacy market that is shrinking. Datadog and others will be eating their lunch as people move to the cloud
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.