Shares of Yext (YEXT 0.11%) -- a software company that helps enterprises provide accurate information to the public -- surged on Wednesday after reporting financial results for the fourth quarter of its fiscal 2023. As of 1:30 p.m. EST, Yext stock was up 9%, but it had been up about 14% earlier in the day.
With revenue growth at a crawl and ongoing losses, I'm somewhat surprised at the positive reaction from investors today with Yext stock. The company does have an investor-day presentation coming up on April 4. But it's hard to imagine strong guidance coming from this event, considering management just guided for 1% year-over-year revenue growth at most in fiscal 2024.
Shares of Yext (YEXT 0.11%) popped over 20% this week, according to data from S&P Global Market Intelligence. The company, which powers internal search engines on consumer websites, seems to be going on a major bull run after announcing multiple new features that take advantage of the language-learning models (LLMs) from OpenAI. As of this writing at 11:36 a.m. EST on Friday, March 3, shares of the stock are up 100% over the last 12 months.
Yext needs to get back to growth, because it appears to be stuck in the mud. Last quarter, revenue was flat year over year while the company still spent heavily on sales and marketing, leading to an operating loss of $12 million. Over the last five years, investors have soured heavily on Yext stock, with shares still down 35% over that time period, even after including the 100% bump over the last six months.
The company also consistently dilutes shareholders, with stock-based compensation at 16% of revenue through the first nine months of 2022. Stagnating revenue, high operating losses, and high stock-based compensation form a recipe for disastrous long-term returns for shareholders. Unless Yext is able to fix any or all of these issues, the stock will probably remain uninvestable despite these new AI products.
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Every month or so, I queue up my \"mergers and acquisition targets\" set of filters to create a watchlist of possible stocks. I did just that today, yielding a list of 34 stocks. The best acquisition targets tend to be tech stocks, at least in terms of prevalence (read: increasing the probability that your stock pick becomes acquired):
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On the downside, the stock finds support just below today's level from accumulated volume at $8.74 and $7.83. There is a natural risk involved when a stock is testing a support level, since if this is broken, the stock then may fall to the next support level. In this case, Yext Inc finds support just below today's level at $8.74. If this is broken, then the next support from accumulated volume will be at $7.83 and $7.72.
This stock has average movements during the day and with good trading volume, the risk is considered to be medium. During the last day, the stock moved $0.250 between high and low, or 2.71%. For the last week, the stock has had daily average volatility of 3.40%.
Since the stock is closer to the resistance from accumulated volume at $9.38(0.86%) than the support at $8.74(6.02%), our systems don't find the trading risk/reward intra-dayattractive and any bets should be held until the stock is closer to the support level.
Several short-term signals, along with a general good trend, are positive and we conclude that the current level may hold a buying opportunity as there is a fair chance for Yext Inc stock to perform well in the short-term.
We'd be surprised if Yext, Inc. (NYSE:YEXT) shareholders haven't noticed that the Co-Founder & Director, Brian Distelburger, recently sold US$419k worth of stock at US$6.13 per share. However, the silver lining is that the sale only reduced their total holding by 2.2%, so we're hesitant to read anything much into it, on its own.
Unfortunately, there has been more insider selling of Yext stock, than buying, in the last three months. In contrast, they appear keener if you look at the last twelve months. It's good to see insiders are shareholders. So the recent selling doesn't worry us too much. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Yext. In terms of investment risks, we've identified 2 warning signs with Yext and understanding these should be part of your investment process.
The stock of Yext (NYSE:YEXT, 30-year Financials) appears to be modestly undervalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $14.82 per share and the market cap of $1.8 billion, Yext stock appears to be modestly undervalued. GF Value for Yext is shown in the chart below.
Because Yext is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth, which averaged 11% over the past three years and is estimated to grow 17.46% annually over the next three to five years.
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Yext is 11%, which ranks in the middle range of the companies in Software industry. The 3-year average EBITDA growth is 8.4%, which ranks in the middle range of the companies in Software industry.
In closing, the stock of Yext (NYSE:YEXT, 30-year Financials) gives every indication of being modestly undervalued. The company's financial condition is poor and its profitability is poor. Its growth ranks in the middle range of the companies in Software industry. To learn more about Yext stock, you can check out its 30-year Financials here.
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Okta (NASDAQ:OKTA) has been one of the standout performers in the technology sector post-covid, with its stock price skyrocketing by more than 130% in 2020. However, widening losses and falling growth caused worries among investors, and OKTA stock is down 75%-plus from its peak in 2021.
The current consensus among 4 polled investment analysts is to Hold stock in Yext Inc. This rating has held steady since February, when it was unchanged from a Hold rating.Move your mouse over pastmonths for detail
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