WalkMe stock will go public this week. It joins a wave of office productivity stocks going public - and unicorns, no less, this one valued at $2 billion.
The WalkMe IPO is slated to raise $280 million in revenue and plans to put all that money toward scaling its product, the Digital Adoptions Platform (DAP).
It's not the first stock of its kind to go public recently - Monday.com, another business software company, did the same earlier in June.
We like Monday.com a lot. But this is not an easy sector to win. Even if its technology sounds interesting, WalkMe could have its work cut out.
Let's talk about whether you should buy WalkMe stock after the IPO.
What Is WalkMe?
WalkMe is a software as a services (SaaS) company in San Francisco, Calif. Its product, the Digital Adoption Platform, helps companies maximize efficiency and return on investment as they scale their software further into the digital age.
The company says it is a "no-code software platform." Organizations can use the tools to "measure, drive, and act" to accelerate return on their software investment.
Basically, enterprise software expenditures are bound to increase over time. IT spending on enterprise software could double from around $500 billion now to $1 trillion by 2030.
The question is whether WalkMe can play top dog in the market for that long.
Its DAP is not merely a productivity app. It's a productivity app that supports the adoption of other productivity apps. The DAP helps guide workforces to adopting new technologies.
The goal is to save employees calls to the IT desk for help. It uses AI to provide insights and tools to "walk" them through the solution.
The great thing about WalkMe is that it does not require code to implement. Instead, the AI recognizes a user interface when it comes across one, and it applies overlays to the application and can be customized from there.
That all sounds good in theory. But just because it's "code-free" doesn't mean implementation is necessarily easy. Every application is still different, and every company hosts its own mix of different enterprise apps, so providing a customized solution for every individual company can be a big haul.
Here's how this has played out in practice for WalkMe so far...
How Is WalkMe Doing?
WalkMe has over 2,000 corporate clients. It has been included in the Forbes Cloud 100, a list of top cloud companies, for five straight years.
Because it is a SaaS company, revenue will recur as long as it can keep clients on the platform. Right now, it has a 118% retention rate with 368 customers paying over $100,000 per year and 22 customers paying over $1,000,000.
The company has raised over $307 million in venture capital since 2019.
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It started its AI-driven platform soon after acquiring DeepUI, which likely provides the technology to help the platform recognize user interfaces. This is what keeps the platform "user-friendly," providing a graphical user interface instead of a specialized programming interface.
Of course, as complex as that sounds, it is not incredibly unique. WalkMe is by no means the only firm in the space, despite the fact that it holds "more than half the global revenue share in the Digital Adoption Platform market" according to its S-1 filing.
WalkMe estimates its total addressable market is $34 billion. But that market is filled with sharks, with more sharks waiting to the water in the years to come.
Here's what that means for WalkMe stock for the time being.
Wait to Buy WalkMe Stock for Now
Recurring revenue from a SaaS company is always a plus. Business productivity apps, if they catch on, can be a major cash cow for investors. The demand is certainly not going away.
But many companies will strive to meet that demand in the future. There are plenty of firms vying to dominate the "digital transformation" trend. Most of them have trouble elaborating on what exactly they do to that effect.
WalkMe is one company that uses all the right futuristic buzzwords but is yet to prove itself in this still-emerging market.
Ultimately, when you invest in an AI stock or an enterprise software stock, you want a compelling reason. And there does not appear to be one for WalkMe this early in the game.
Of course, a compelling reason could arise after the IPO, but it has not yet. Buying into technology stocks like this can be like finding a needle in a haystack.
Sure, you find the needle sometimes. But if you want to go through the trouble, that is your call. Better to wait this one out and see what develops.
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