Newly Public Intapp Well-Positioned For More Price Gains

Key Points

• Business software maker Intapp has a consensus rating of "buy."
• The company reported strong Q3 results, resulting in several analysts raising their price targets. 
• Shares gapped down following a secondary offering of common stock; prices often decline as more equity is issued.
• Intapp's position as a newly public company makes it attractive to institutional investors.

Small-cap business software maker Intapp Inc. NASDAQ: INTA analyst ratings show a consensus view of “buy.” 

This is a stock that has several factors going for it, that could make it a solid price performer in the coming months or years, but would-be investors shouldn’t make too much of a recent wild ride in the share price. 

Intapp stock gapped sharply up and down in May, but those price moves were due to very specific reasons. 

Here’s a rundown of the price action: On May 9, Intapp stock gapped up 15.45% following a better-than-expected third-quarter report. The company reported net income of $0.03 a share, up from a loss of $0.04 a share a year ago. 

Revenue Growth Accelerating

Revenue of $92 million, a 32% year-over-year increase, topped views of $87.5 million. The rate of revenue growth accelerated in the past three quarters.  

The company expects full-year earnings per share in the range of $0.07 to $0.09, with revenue ranging between $349 million and $350 million. Wall Street has pegged their consensus view at the high end of that range, having updated their forecasts recently, as you can see using Intapp analyst ratings. 

After the third-quarter report, four analysts boosted their price targets on Intapp stock.

Price Declined On Share Offering

As you can see on the Intapp chart, shares quickly reversed lower, but not because of some sudden, bad development. 

On May 17, the company priced a secondary offering of 6,250,000 shares of common stock at a public offering price of $36.50 per share. That was below where the stock was trading at the time. 

The offering consisted of 2,000,000 shares being sold by the company and 4,250,000 shares being sold by certain selling stockholders. That would raise an aggregate of $73 million to the company and approximately $155.1 million to the selling stockholders, before fees such as underwriting and commissions.

In addition, certain of the selling stockholders granted the underwriters an option for a period of 30 days to purchase up to an additional 937,500 shares on the same terms and conditions.

Why would a company issue new shares at a lower price? 

Raising Capital And Attracting New Investors

For starters, it allows a company to raise capital and attract more investors. This dilutes existing shareholders' ownership but may mitigate the impact compared to higher-priced shares. 

The increased supply of shares can lead to a drop in the stock price, as it creates a larger ownership stake and may be perceived negatively by the market. 

However, during market downturns or underperforming stock prices, issuing lower-priced shares can stimulate demand and improve market sentiment.

Intapp is in an excellent position to post further price gains. It’s a newly public company, having made its debut in July 2021. With sales growth and a pivot to profitability, it’s likely to attract more institutional investors, who will pretty quickly get over any tears about dilution.

Buyers Outnumber Sellers

In the past 12 months, according to Intapp institutional ownership data, 76 institutional buyers accounted for $113.38 million in inflows, versus 22 institutional sellers who unloaded $40.63 million. 

The company provides cloud-based customer relationship and practice management software for professional and financial services firms. According to the company, “The platform facilitates greater team collaboration, digitizes complex workflows to optimize deal and engagement execution, and leverages proprietary AI to help nurture relationships and originate new business.”

Wall Street Eyes Double-Digit Growth

Sales have been growing at rates between 23% and 32% in the past eight quarters. Now that the company is moving into profitability, Wall Street sees earnings growing by 82% in fiscal 2024, to $0.16 per share. 

Intapp stock is up 60.87% so far this year, despite the recent pullbacks. Shares peaked at $47.04 on April 19, before retreating. The current price consolidation brought the stock below its 50-day line, but shares are still trading 37% above their 200-day average. 

A selloff after a big run-up is normal, as is a selloff when new shares are issued. 

The current buy point is above that April high of $47.04, but an earlier opportunity could present itself if the stock forms a handle, or gathers strong upside momentum as it crosses back above its 50-day average.