Short Interest Jumps Nearly 23% in August 2019

Short interest in New Relic Inc (NYSE: NEWR) increased sharply between mid-July and mid-August 2019. As of August 15th, total short interest stood at 3,112,700 shares — a 22.9% increase from the 2,532,900 shares reported on July 15th. Short sellers held approximately 6.5% of the company’s outstanding shares, and with an average daily trading volume of 1,250,000 shares, the days-to-cover ratio sat at 2.5 days.

A rising days-to-cover ratio and increasing short interest can signal growing bearish sentiment among traders, though it does not necessarily predict future price direction. In New Relic’s case, the move came against a backdrop of declining share price and mixed analyst opinion.

Stock Price and Key Technical Metrics

At the time of reporting, New Relic stock opened at $56.31. The stock had traded in a wide 12-month range of $54.83 to $113.34, indicating significant volatility over the prior year. Key metrics as of late August 2019 included:

• Market capitalisation: $3.42 billion
• Price-to-earnings (P/E) ratio: -181.65 (negative, reflecting net losses)
• Beta: 0.83
• 50-day simple moving average: $77.06
• 200-day simple moving average: $94.10
• Debt-to-equity ratio: 1.32
• Current ratio: 2.88
• Quick ratio: 2.88

The stock was trading well below both its 50-day and 200-day moving averages, a technical signal often interpreted as a bearish trend. The negative P/E ratio reflected the company’s position as a high-growth SaaS business reinvesting heavily in expansion rather than reporting GAAP profits.

Q1 FY2020 Earnings: Revenue Beat, Loss Narrower Than Expected

New Relic reported its quarterly earnings on August 6th, 2019. The company posted an earnings-per-share (EPS) loss of $0.16, which beat the Zacks consensus estimate of -$0.18 by $0.02. Revenue for the quarter came in at $141.01 million, slightly above analyst expectations of $139.73 million and representing 30.3% growth year-over-year. In the same quarter of the prior year, the company had earned $0.15 EPS.

Other reported financial health indicators included:

• Return on equity: -8.55%
• Net margin: -9.93%
• Full-year EPS consensus estimate: -$0.68

While the revenue growth rate of 30% remained strong for an enterprise SaaS business, the transition from GAAP profitability (the year-prior quarter showed positive EPS of $0.15) to a net loss reflected increased investment in sales, marketing, and product development.

Insider Selling Activity

Several senior executives sold significant blocks of stock in the months preceding this report:

• CEO Lew Cirne sold 19,500 shares on June 4th at an average price of $97.72 per share, for a total transaction value of $1,905,540. The sale was disclosed in a filing with the U.S. Securities and Exchange Commission.
• CFO Mark Sachleben sold 15,000 shares on June 18th at an average price of $96.98 per share, totalling $1,454,700.

In total, company insiders sold 133,904 shares valued at approximately $11.5 million over the preceding quarter. Company insiders owned approximately 17.40% of total outstanding shares at the time of reporting. Insider selling at prices materially above where the stock subsequently traded is a data point sometimes noted by analysts, though insider transactions are regularly part of pre-planned trading arrangements and do not necessarily reflect a negative view of the company’s prospects.

Institutional Ownership and Recent Activity

Institutional investors and hedge funds held approximately 74.72% of New Relic’s outstanding shares. Several institutions adjusted their positions around this period:

• First Trust Advisors LP increased its stake by 24.7% in Q2 2019, bringing its total to 1,516,324 shares valued at approximately $131.2 million after acquiring an additional 300,484 shares.
• Jennison Associates LLC increased its stake by 58.7% in Q2 2019, bringing its total to 723,864 shares valued at approximately $62.6 million after acquiring an additional 267,840 shares.
• Diversified Trust Co increased its stake by 17.8% in Q2 2019, adding 970 shares to reach a total of 6,432 shares valued at approximately $556,000.
• O Shares Investment Advisers LLC initiated a new position in Q1 2019 valued at approximately $445,000.
• Peregrine Asset Advisers Inc. initiated a new position in Q1 2019 valued at approximately $296,000.

Analyst Ratings and Price Targets

Following the August 6th earnings release, multiple Wall Street analysts revised their price targets. Coverage as of late August 2019 showed a wide spread of opinion:

• DA Davidson: Reduced price target to $95.00; maintained “Buy” rating.
• Wedbush: Reiterated “Outperform” rating; reduced price target from $124.00 to $99.00.
• UBS Group: Set a $73.00 price target; assigned a “Hold” rating.
• BMO Capital Markets: Reduced price target to $73.00; maintained a “Positive” rating.
• Needham & Company LLC: Set a $120.00 price target; assigned a “Buy” rating.

Across all analysts covering NEWR at the time: 2 issued sell ratings, 7 issued hold ratings, and 10 assigned buy ratings. The consensus rating was “Hold” with an average price target of $96.67 — approximately 71% above where the stock was trading at the time of the report, illustrating the divergence between analyst targets and market price.

About New Relic

New Relic, Inc. is a software-as-a-service (SaaS) company that provides observability and digital intelligence products to organisations worldwide. Its cloud-based platform enables businesses to collect, store, and analyse telemetry data across their entire technology stack. Core products at the time of this report included:

• New Relic APM (Application Performance Management): Provides code-level visibility into server-based application performance, covering response times, transaction throughput, error rates, and user satisfaction scores.
• New Relic Mobile: Monitors the performance and health of iOS and Android mobile applications at the code level.
• New Relic Browser: Tracks page-load and interaction experiences for real end-users across desktop and mobile browsers.

New Relic operates in the observability and application performance monitoring (APM) market, competing with vendors such as Datadog, Dynatrace, and AppDynamics. The company’s transition to a consumption-based pricing model — announced in subsequent years — would later reshape how it reported revenue and user metrics.

Source data originally reported by Sundance Herald, August 2019. All figures are historical and reflect conditions as of the reporting date.