Shares of Yext (YEXT 19.32%) soared on Thursday. The provider of data-driven brand management solutions posted solid third-quarter results with mixed Q4 guidance on Wednesday evening, driving the stock as much as 21.2% higher in Thursday’s early trading session. The shares calmed down somewhat to close with a 19.2% gain.
Yext’s third-quarter revenue held almost perfectly steady year over year at $99.3 million, though the result works out to 4% growth on a constant currency basis. The bottom line swung from a net loss of $0.04 per share in the year-ago quarter to earnings of $0.02 per share in this report.
Your average analyst had expected a net loss of roughly $0.01 per share on sales near $99.6 million.
Looking ahead, Yext issued fourth-quarter revenue guidance just below the current analyst consensus, while earnings projections landed just above the Street’s consensus view.
It should be noted that Yext spends an extraordinary amount of money on sales and marketing without igniting any skyrocketing revenue charts. The company funneled 55% of its revenue into marketing and sales across the first three quarters of 2022. This uncomfortable imbalance between high effort and modest sales growth is like squeezing lemon juice out of a granite slab.
The third quarter showed some stability in Yext’s client-signing trends but didn’t exactly blow investor expectations out of the water. Of course, that’s all it takes to ignite a sharp-price spike: exceeding low expectations. Still, the stock is trading 46% lower year to date, even after Thursday’s big jump.
This type of value-added service on a cloud-based platform should thrive in a tight economy, as Yext’s tools are designed to drive stronger business growth for its clients. The reported results don’t support that thesis, and I’m quite frankly not impressed by this relatively modest earnings report.