Analysis

Why Yext Stock Is Falling Today

Investors aren’t thrilled with Yext’s latest quarterly results and acquisition plans.

Yext (YEXT -5.66%) stock is falling Tuesday following recently published quarterly earnings and acquisition news. The company’s share price was down 4.4% as of 11:45 a.m. ET, according to data from S&P Global Market Intelligence.

After the market closed yesterday, Yext published results for the first quarter of its current fiscal year — a period that ended April 30. In addition to posting sales and earnings that fell short of the market’s expectations, the software specialist also announced that it would acquire Hearsay Systems in a deal that could be valued at as much as $220 million.

Yext stock is seeing volatile swings

Yext reported non-GAAP (adjusted) earnings per share of $0.05 on sales of approximately $96 million for the first quarter of its current fiscal year. Meanwhile, the average analyst estimated had called for the business to deliver adjusted per-share earnings of $0.06 on revenue of roughly $96.3 million. Sales in fiscal Q1 were down 3.5% compared to the prior-year period, annual recurring revenue fell 4% year over year to $382.6 million, and adjusted earnings were down 37.5% from the $0.08 per share the business posted last year.

Yext, which provides a platform that helps businesses manage their brands and presence online, also had big acquisition news to announce. The company is on track to acquire Hearsay Systems, which provides digital client engagement tools for financial services, in a deal that will be worth at least $125 million. If certain performance benchmarks are met, Hearsay could receive up to $95 million in additional payments.

The market reacted negatively to the combination of the Q1 performance misses and acquisitions news, and shares had been down as much as 14.9% earlier in the day’s trading session. But it looks like some investors treated the big pullback as a buying opportunity, and the stock’s loss on the day has moderated.

What comes next for Yext?

For the second quarter of this fiscal year, Yext is guiding for sales to come in between $98 million and $98.4 million. If the company were to hit the midpoint of that performance range, sales would come in 4.3% lower than in last year’s quarter. Meanwhile, adjusted earnings per share are projected to be between $0.02 per share and $0.03 per share — suggesting a significant drop off from the $0.07 per share posted in last year’s quarter.

For the full fiscal year, management expects revenue to be between $394 million and $396 million — down from the $400.9 million in sales it recorded last year. While Yext’s sales have been slipping lately, it’s possible that the acquisition of Hearsay Systems will allow the software specialist to tap into synergies between the two businesses and return to posting regular sales growth.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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