Samsara Stock Plunges, But Technicals Flash a Buy Signal

Key Points

• Samsara is down 45% from February's high despite record-breaking revenue and strong guidance.
• BMO Capital just upgraded the stock to Outperform, seeing a 40% upside from Monday's price.
• RSI at 18 signals extreme oversold conditions, creating a compelling risk-reward setup.

Not many tech stocks have had a better run than Samsara Inc NYSE: IOT in recent months. The company, known for its AI-powered solutions used by the trucking industry, hit an all-time high in mid-February, riding a wave of strong earnings and growth momentum. Since then, however, the stock has collapsed 45%, retracing all the way back to 2023 price levels.

This sharp decline isn't due to poor company performance. Samsara's earnings last Thursday once again smashed expectations on the headline numbers, with revenue climbing 25% year over year to a new all-time high. The number of customers spending more than $100,000 annually surged 36%, a key metric for SaaS growth. The guidance also came in within expectations, signaling management's confidence in continued momentum.

Despite the drop in shares, CEO Sanjit Biswas maintained a bullish tone, emphasizing Samsara's leadership position in the market. He told investors, "We're operating at a rare combination of growth, scale, and profitability, and we see a large market opportunity ahead of us." While the stock's recent selloff has rattled some investors, the company's fundamentals remain intact, suggesting that wider market sentiment, not specific company performance, is the issue.

Why Analysts See a Major Upside Opportunity

Backing up this theory is the fact that despite the heavy selling, Wall Street remains bullish on Samsara. BMO Capital Markets just upgraded the stock to Outperform and gave it a $48 price target, implying a 40% upside from Monday's closing price. Analyst Daniel Jester believes the recent pullback has created a rare buying opportunity, citing multiple growth drivers, including AI-driven data insights and untapped market expansion.

BMO isn't the only firm that is standing by Samsara. In the past week, nearly all analysts covering them have reiterated Buy or equivalent ratings, signaling that institutional investors still believe in the long-term growth story. The company's total addressable market continues to expand, particularly in telematics and vehicle safety, where modern solutions remain underpenetrated. This suggests that Samsara's revenue runway remains long despite near-term volatility.

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Market Sentiment Is the Real Headwind

The broader market's shift away from high-growth, unprofitable stocks has likely been the major factor in Samsara's decline.

Investors have been rotating into safer assets as the S&P 500 continues its recent slide, leading to indiscriminate selling in riskier and not-yet-profitable names like IOT.

While Samsara's earnings and guidance remain strong, the market has little patience for stocks that haven't yet reached sustained profitability.

This dynamic has driven Samsara's RSI to just 18, an extremely rare level that signals oversold conditions.

Historically, stocks with an RSI this low tend to see sharp rebounds once sentiment shifts, making this a particularly attractive entry point for those with a long-term view.

What Needs to Happen Next

The broader market likely needs to stabilize for Samsara to regain its long-term upward momentum. If risk appetite returns, the stock should rebound sharply, given its strong fundamentals and institutional support. Investors will also be watching management's execution in the coming quarters, particularly in controlling costs while maintaining growth.

But regardless, at current levels, the risk-reward setup is highly compelling. The company is delivering record-breaking earnings, analysts are maintaining bullish price targets, and the stock's RSI is now at levels that have historically preceded, at the very least, temporary lows. While broader market conditions may dictate short-term price action, Samsara's long-term growth story remains intact. For those looking to start a position in a high-growth tech stock at a steep discount, this may be one of the best opportunities of the year.