What Do Qualtrics’ Newly Added Risk Factors Reveal?

Qualtrics International (XM) provides experience management solutions to enterprises. It recently entered into an agreement to acquire Clarabridge in an all-stock transaction valued at $1.125 billion. Clarabridge helps companies analyze customer feedback from diverse sources such as support calls, social media, and product reviews. The deal is expected to close by the end of 2021.

Don't Miss our Black Friday Offers:

Unlock your investing potential with TipRanks Premium - Now At 40% OFF!
Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter

Let’s take a look at Qualtrics’ latest financial performance and risk factors.

Qualtrics’ Q2 Financial Results and 2021 Guidance

Revenue increased 38% year-over-year to $249.3 million in Q2 and exceeded consensus estimates of $241.63 million. The company reported an adjusted net loss per share of $0.04, compared to a loss per share of $0.01 a year ago. (See Qualtrics stock charts on TipRanks).

For Q3, the company expects revenue to be in the range of $257 million – $259 million. It anticipates an adjusted loss per share of between $0.03 and $0.01 for the quarter.

For full-year 2021, Qualtrics expects revenue of at least $1 billion and anticipates an adjusted loss of $0.02 or breakeven for the year.

Qualtrics’ Risk Factors

The new TipRanks Risk Factors tool shows that 73 risk factors have been identified for Qualtrics. Since June 2021, the company has revised its risk profile to add two new risk factors related to the Clarabridge acquisition.

A newly added risk factor under the Finance and Corporate category cautions that integrating Clarabridge may be more challenging than anticipated and that there is no guarantee the acquisition will deliver the benefits that Qualtrics expects.

Under the Legal and Regulation category, a newly added risk factor tells investors that Clarabridge may carry liabilities that Qualtrics had not discovered when it entered the deal. The company says that Clarabridge’s liabilities could adversely affect its financial condition and operations.

Finance and Corporate is Qualtrics’ top risk category at 38% of the total risks. Legal and Regulatory and Tech and Innovation are the next two major risk categories at 19% and 18%, respectively.

Analysts’ Take

Following Qualtrics’ Q2 results, Citigroup analyst Drew Foster maintained a Buy rating on Qualtrics stock with a price target of $55. Foster’s price target suggests 27.67% upside potential.

Consensus among analysts is a Moderate Buy based on 10 Buys and 4 Holds. The average Qualtrics price target of $48 implies 11.42% upside potential to current levels.