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Medallia: Time To Swoop In

Mar. 08, 2021 4:20 PM ETMedallia, Inc. (MDLA)6 Comments
Gary Alexander profile picture
Gary Alexander


  • Shares of customer experience software company Medallia have fallen more than 35% from all-time highs.
  • Losses accelerated after the February tech rout as Medallia posted Q4 earnings results, despite beating Wall Street's expectations in the quarter.
  • Investors took issue with the company's expectations of deceleration in Q1, despite a full-year FY22 outlook that topped consensus expectations.
  • Medallia remains a fairly unique software play with very high-profile comps like Qualtrics, and has fallen to attractive valuations at ~7.5x current-year revenue.
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The tech sector has been a minefield over the past few weeks, and in the rubble there are a few stocks that were already cheap to begin with pre-February that have become even more so following the recent correction.

Medallia (NYSE:MDLA) is one of those names. A relatively little-known software company that focuses on customer experience management (collecting and analyzing customer and user data on behalf of companies like banks, media companies and automakers), Medallia stock has been inexplicably hit over the past month despite stable fundamentals and a path for further growth in 2021.

To me, this stock is flashing buy signals.

The Medallia story is still going strong

Medallia is a big beneficiary of the "data-driven decision making trend." These days, C-suites are wanting to take actions based on what data they can capture from their customers. Platforms like Medallia help businesses log customer touchpoints ranging from email, customer support incidents, and web activity, and translate that data into actionable insights for company leaders. Perhaps most impressive of all about Medallia is the diversity of its go-to-market engine: it is resold by top-notch consulting firms like Bain as well as being an integrated application on platforms like Salesforce (CRM) and Adobe (ADBE).

Figure 1. Medallia go-to-market channelsSource: Medallia Q4 investor presentation

It also has garnered significant mindshare in its space and won high rankings from Gartner, the noted software industry analyst and researcher. Gartner named Medallia, alongside its much better-known rival Qualtrics (XM) which just completed a highly sought-after spinout from SAP (SAP), as the two Leaders in its annual Magic Quadrant for the "Voice of the Customer" space:

Figure 2. Medallia Gartner rankingsSource: Medallia Q4 investor presentation

As more and more companies turn their decision-making systems away from executive judgment and more on rigorous

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This article was written by

Gary Alexander profile picture
With combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on Seeking Alpha since 2017. He has been quoted in many web publications and his articles are syndicated to company pages in popular trading apps like Robinhood.

Analyst’s Disclosure: I am/we are long MDLA. 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.

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Comments (6)

sa6abe profile picture
How about the crazy share dilutions? Revenue grows 20-40% but share count 70%... RPS keeps getting lower...
Having owned the stock, I sold after the previous report when it shows their land-and-expand strategy is failing miserably. They are having extreme difficulty converting small deals to enterprise software, which is their big ticket item. MDLA made lots of acquisitions in last 3 years and made attempts to the mid-market, but those pilots and small deals are costly if they do not lead to upside. That is what is happening and what the market dislikes. Qualtrics has more upside and value right now, in my opinion.
Timely article, tks. Trying to decide between restarting positions in MDLA or PLAN.
rt94103 profile picture
Already bought the dip and now have a full position. Nice to read this after the fact. Thanks, Gary!
Sunny Goklani profile picture
I like MDLA - Unique positioning in a market that only will grow with more data! I wonder though - why is growth so slow - would expect such an attractive space to grow 30%+
@Sunny Goklani Growth has stalled for a host of reasons. See my prior comment.
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