Why Duck Creek Technologies Stock Just Collapsed 22%
Actions of the software provider as a service of the insurance industry Duck Creek Technologies (NASDAQ: DCT) collapsed in trading on Friday, falling 21.7% until 1 p.m. EDT after releasing what – at least at first glance – looked like a good fourth quarter 2021 earnings report last night.
Expected to earn $ 0.02 per share, pro forma, on sales of $ 69.1 million, Duck Creek made $ 0.02 per share on sales of $ 70.8 million – not a huge profit, but a beat nonetheless.
The software vendor’s recurring revenue increased 41% and subscription revenue increased 35%. Total sales for the quarter increased 21%. This is the good news.
The bad news is that Duck Creek’s earnings weren’t earnings at all – at least when calculated under generally accepted accounting principles (GAAP). Instead, the company reported a GAAP net loss for the quarter of $ 0.04 per share and a loss of $ 0.13 for the year.
On top of that, Duck Creek’s forecast for the first quarter of fiscal 2022, and for the year as a whole, was quite uncertain. For the first quarter of the year, Duck Creek predicted revenues ranging from $ 68 million to $ 70 million, which, at midpoint, would barely exceed the $ 68.7 million forecast by Wall Street. Worse yet, Duck Creek has warned that its revenue by the end of the year – $ 292 million to $ 300 million in revenue – will be significantly lower than the $ 303 million forecast by analysts.
In a note this morning, RBC Capital warned that this implied a “significant” slowdown in the company’s growth going forward, and JP Morgan lowered the stock due to weak forecasts, which he said no longer support the company’s âcloud and growth thesisâ.
Hence the massive sale of a beaten profit today.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.