Why Yext Stock Is Plummeting Today
Key Points
Yext posted better-than-expected earnings in fiscal Q1, but sales missed Wall Street's target.
The company was able to boost operating profits by cutting expenses, but its gross profit slumped.
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Yext (NYSE: YEXT) stock is getting hit with a big pullback in Wednesday's trading. The company's share price was down 11.3% as of 2:15 p.m. ET. Meanwhile, the S&P 500 was down 0.6%, and the Nasdaq Composite was down 0.9%.
The broader stock market is getting hit with sell-offs today in response to higher oil prices and rising bond yields, and Yext's valuation is also under pressure due to the company's latest quarterly report. After the market closed yesterday, the enterprise agentic marketing specialist published results for the first quarter of its 2027 fiscal year -- which ended April 30.
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Yext stock slips on mixed fiscal Q1 results
In fiscal Q1, Yext delivered non-GAAP (adjusted) earnings per share of $0.14 and sales of $107.9 million. While the company's per-share profit came in $0.01 higher than the average analyst estimate, sales unexpectedly declined 1.4% year over year and missed the average analyst estimate by $4.2 million.
Analysts had been targeting low-single-digit growth in the quarter, but sales performance wound up being significantly weaker than expected -- and potential positives surrounding lower operating costs were offset by softer gross margins. Annual recurring revenue at the end of fiscal Q1 stood at $440.8 million, representing a decline of 1% year over year.
What's next for Yext?
Along with its fiscal Q1 report, Yext announced that its board of directors had approved an additional $100 million in stock buybacks. The new authorization brings the total approved buyback allotment to roughly $115 million.
Yext's gross profit declined to roughly $78.7 million in fiscal Q1 -- down from roughly $82.4 million in last year's quarter. While the company's operating income rose roughly 399% year over year to hit $5.6 million in the quarter, the gains were driven by cuts to operating expenses. Improving profitability by cutting expenses isn't bad in and of itself, but declining sales and gross margins could suggest limited room for long-term earnings growth.
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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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