Why JFrog Stock Dropped 12% on Friday

What happened

JFrog (NASDAQ:FROG) investors lost ground to the market on Friday. The stock lost over 12% as of 11 a.m. EDT even as the S&P 500 ticked slightly higher, according to data provided by S&P Global Market Intelligence.

The drop added to significant short-term losses so far in 2021 and was driven by a poorly received earnings report.

A man working behind a computer screen.

Image source: Getty Images.

So what

The company, whose development platform helps software makers build and maintain their products, had good operating news to report. Revenue rose 34%, mainly thanks to rising demand for JFrog’s cloud services.

That result was just a touch above the outlook that management had issued back in early May but marked a slowdown from the prior quarter’s 37% increase. “JFrog again reported a strong quarter across the business,” CEO Shlomi Ben Haim said in a press release.

Now what

Wall Street wasn’t thrilled with the tech stock’s new short-term outlook that predicts Q3 revenue of between $52 million and $53 million. Management said in a conference call that subscription renewals might be pressured by a pull-forward impact from a discount the company offered on early commitments.

Even still, JFrog raised its 2021 growth outlook slightly, with gains likely hitting 35% for the full year. Growth is expected to speed up a bit in Q4 after slowing again next quarter. Wall Street had been hoping for a more aggressive forecast. And, just as they did following the previous report, investors are sending JFrog’s shares lower as they wait for more concrete evidence of accelerating sales gains.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

View more information: https://www.fool.com/investing/2021/08/06/why-jfrog-stock-dropped-12-on-friday/

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