What Happened?
Shares of online reputation and search platform Yext (NYSE:YEXT) fell 17.9% in the morning session after the company reported underwhelming third-quarter results. The company did not raise full-year guidance in line with the beats. This implies that the company's expectations for Q4 are below Wall Street's estimates.
On the other hand, Yext blew past analysts' billings expectations. Its EBITDA also outperformed Wall Street's estimates. Zooming out, we think this was a good quarter with some questions about guidance mechanics. The areas below expectations seem to be driving the move.
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What The Market Is Telling Us
Yext’s shares are somewhat volatile and have had 14 moves greater than 5% over the last year. But moves this big are rare even for Yext and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock gained 24.2% on the news that the company reported strong fourth-quarter results with revenue exceeding expectations by a narrow margin, though EPS came in well ahead of Wall Street's estimates. Yext produced $14.8 million of adjusted EBITDA (vs estimates of $12.6 million), partly thanks to a significant year-on-year increase in its gross margin, which expanded from 74% to 78.6% thanks to the company's shift to a professional services strategy. This encouraging gross margin expansion trumped its underwhelming full-year revenue guidance, which was below expectations. A reason for the lower revenue guidance was the loss of a large customer during the quarter, but the market doesn't seem to care. Overall, it was a decent quarter for Yext.
Yext is up 21.8% since the beginning of the year, but at $7.08 per share, it is still trading 17.7% below its 52-week high of $8.60 from December 2024. Investors who bought $1,000 worth of Yext’s shares 5 years ago would now be looking at an investment worth $516.05.
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