Sumo Logic-Can It Do The Heavy Lifting Required To Achieve Success In A Crowded Space

Summary

• Sumo Logic is a recent IPO that appears reasonably valued.
• It is trading below its IPO price.
• The company's growth has been greatly impacted by the effects of the pandemic on the  economy.
• The company appears to have impressive technology with a modern, cloud native architecture desired by many users.
• Trying to build a company competing against Splunk, Elastic and Datadog is a daunting undertaking but the potential rewards are equally significant.

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Trying to find a recent IPO with an "investable" valuation

Late summer and early fall has brought a tsunami of warm weather to the US east coast and a crop of overvalued IPO's. Not all too sure if the weather is correlated with expensive IPO's. The one that has gotten the most headlines is Snowflake (SNOW), whose shares more than doubled the first day of trading, and whose valuation reached a remarkable high point of valuation with an EV/S ratio of 74X based on my forecast for revenues which is almost certainly significantly greater than the consensus. It is difficult to review all of the IPO’s in the IT space that have started trading-and then again, their valuations have been at levels that make little sense for most investors.

Perhaps the most reasonably valued of the crop of recent IPO’s is a company called Sumo Logic. (SUMO) Sumo is a company that is focused on what it calls “Continuous Intelligence.” Probably most analysts are going to consider this company’s solutions to be in the same category as those offered by Splunk (SPLK) and other SIEM vendors. On a broader basis, this company has use cases that address the several issues involved in observability and performance measurement. Given the capabilities of the solutions, it is not too surprising that the company has developed some security use cases as well-pretty much the same as what Splunk does. At this point, the Sumo platform ingests data from 200 applications and integrations with more coming over time. Overall, Sumo has use cases that afford a variety of professionals including developers, IT administrators and security teams, with meaningful solutions. The

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.