New Relic (NYSE:NEWR)

What a comeback!!!

New Relic has changed their pricing model to a simple users + data ingest based consumption pricing and converted 80+% of their customers to this new model. New Relic has been able to significantly increase the rate of retaining existing customers. The growth of paid users + data ingest is growing at a healthy pace in 6 months. New Relic has been leading innovation with new ways to get value from the platform like Pixie for Agentless Kubernetes Observability, added Network Performance Monitoring and has just announced in-IDE Observability with Codestream. New Relic has been able to quickly integrate recent acquisitions like Codestream and Pixie into its platform. New Relic signed a 500M partnership with AWS this year. Just recently they announced a partnership with Microsoft too. New Relic is currently trading at 5x 22 revenue and is very cheap compared to competitors like DDOG and DT. I would expect New Relic’s growth to be at a healthy 30% YoY by the end of this year making its true value at around $200 a share if it were priced at the same multiples of DT. I would expect New Relic to beat market expectations in Q3, perhaps even beat the EPS for a 3rd time in a row since Bill Staples has taken over. Bill Staples has changed New Relics vision to help engineers make data driven decisions across the entire DevOps lifecycle, Plan, Build, Deploy and Operate phases of DevOps. This will significantly increase the paid user base across existing customers. At 25 cents per GB data ingest costs, it is 5x cheaper than DDOG for data ingest and heaps more cheaper than Splunk or DT. It’s price can scale unlike DDOG that charges based on features and hosts. New Relic gave up its market leader position to DDOG but now Bill Staples has turned the company around and accelerated growth to catch up with DDOG in terms of product capability and is now arguably delivering much more value to its customers at a much lower price point than DDOG.