Why Amplitude Stock Crashed Today

What happened

It was a hard day for Amplitude (NASDAQ:AMPL) investors. Shares of the cloud software company focused on digital optimization plunged after the new public title posted strong fourth-quarter results but offered a weaker-than-expected 2022 revenue outlook.

Going into the report with an expensive valuation and into its second quarterly report as a public company, the stock was cut in half as a result. As of 11:05 a.m. ET today, shares were down 52.1%.

Image source: Amplitude.

So what

Amplitude, which helps companies analyze their data to make better product decisions, posted strong fourth-quarter numbers across the board.

Revenue rose 64% in the fourth quarter to $49.4 million, beating analyst estimates of $47 million and the company’s own forecast of $46 million to $47 million. It also showed a 78% increase in remaining performance obligations (RPO) to $170.1 million, indicating that its backlog remains strong. RPO for next year was also encouraging, up 60% to $137.3 million.

Total customers increased 54% to 1,597, and its net retention rate reached 123%, an improvement from 119% in the prior year quarter, meaning existing customers increased their expenses by 23%.

The company nearly doubled its sales and marketing spend to address the growth opportunity before it, and as a result, its free cash flow loss fell from $3.8 million to $12 million. .2 million. It also posted an adjusted loss per share of $0.05, but that topped analyst consensus with a loss of $0.08 per share.

CEO Spenser Skates said: “2021 has been a breakthrough year for Amplitude. Digital products are becoming the central driver of how businesses operate, market, and generate revenue. He added, “We believe we are in the very early stages of a great market opportunity, and we are excited to help companies realize the business results of digital optimization.

Now what

What killed the stock today was the company’s guidance. For the first quarter, it forecast revenue of $50 million to $51 million, up 52.5% at the midpoint, which was slightly below estimates of $51.3 million. For the full year, the company called for revenue of $226-234 million, up 35%-40%, which also missed the Wall Street consensus of $235.9 million. dollars.

While a sell-off in the stock seems warranted given the weaker-than-expected forecast, a 50% drop seems excessive. There’s nothing in the report that would signal a fundamental problem with the business, and the full-year guidance could easily increase as the year progresses. If the company ends up beating its own forecast, today’s selloff will clearly have been a buying opportunity.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

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