Home Japanese values Why Freshworks shares fell 29.9% in November

Why Freshworks shares fell 29.9% in November


What happened

Actions of Freshworks (NASDAQ: FRSH) fell 29.9% in November, according to data from S&P Global Market Intelligence.

The software as a service (SaaS) inventory lost ground after the company released its first quarter results, and it continued to decline as the month went on:

FRSH data by YCharts.

Freshworks released its first quarter results on November 2, posting sales and earnings for the period ahead of market expectations. The company recorded a non-GAAP (adjusted) loss of $ 0.04 on revenue of $ 96.61 million during the period, while analysts’ average estimate predicted a loss of $ 0.10 per share on sales of $ 90.85 million. The enterprise software specialist delivered top and bottom results, but performance was less inspiring on other key fronts.

People at a conference table in an office.

Image source: Getty Images.

So what

Freshworks sales grew 46% year-over-year in the third quarter. The company’s net dollar retention rate for the period was 117%, meaning existing customers increased their spend by 17% compared to the prior year period. Despite recording sales and profits above market expectations, the company saw its free cash flow drop to a loss of $ 4.2 million during the period, from positive free cash flow. of $ 10.3 million during the period of the previous year.

Freshworks also had a partial expiration of the share lock-up on November 4, allowing insiders to sell some of their shares; this lock-in expiration may have created additional selling pressure that helped push the company’s stock price down as the month went on. In the meantime, investors have weighed the risks presented by rising Treasury bond yields and the omicron variant of the coronavirus, and have become more cautious of growth-dependent technology games.

Now what

Freshworks stock continued to decline in early December trading. So far, the company’s share price has fallen by around 19% on the month:

FRSH chart

FRSH data by YCharts.

For the fourth quarter, the company expects sales of between $ 99 million and $ 101 million. Management is targeting an adjusted loss of between $ 0.05 and $ 0.07 for the period.

For the full year, Freshworks expects an adjusted loss per share of between $ 0.20 and $ 0.22 on sales of between $ 364.5 million and $ 366.5 million. The company now has a market cap of around $ 4.9 billion and is trading at around 13.4 times the midpoint of expected sales this year.

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Keith Noonan has no position in 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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