Why Constant Contact Inc Stock Is Down

Why Constant Contact Inc Stock Is Down

Constant Contact plummeted after reporting its financial results for the first quarter of 2015. The company missed its revenue target.

The stock price of Constant Contact Inc (NASDAQ:CTCT) declined more than 22% to $27 per share at the time of this writing around 2:11 in the afternoon in New York.

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Constant Contact CEO Gail Goodman said, “We were disappointed with the mixed results for the quarter as revenue came in below expectations while profitability was better than expected.” She added that Constant Contact failed to deliver the expected acceleration in customer additions, which caused the company to missed its revenue target for the quarter.

Given the current trends, we are adjusting down our revenue plans for the remainder of the fiscal year,” said Goodman.

Constant Contact financial results

Constant Contact reported non-GAAP net income of $3.6 million or $0.11 per diluted share, higher than the $850 thousand or $0.03 per diluted share recorded in the same period last year. Its revenue was $90.4 million, and gross margin was 73%.

According to the company, its cash flow from operations was $20.2 million, capital expenditures were $5.13 million, and free cash flow was $15 million. Constant Contact ended the quarter with $179.1 million in cash, cash equivalents, and marketable securities.

Constant Contact added 55,000 unique customers. The company has 645,000 unique customers by the end of the quarter. During the previous quarter, the company had 635,000 unique customers, which means it only added 10,000 customers in three months.

The company’s monthly revenue per unique customer (ARPU) was $47.09 during the quarter, up from $43.82 in the same period a year ago. Its monthly retention rate of paying customers remained high at 97.8%.

Business outlook

Constant Contact expected to achieve non-GAAP net income in the range of $0.21 to $0.22 per share and revenue of around $91.5 million to $92 million for the second quarter.

For the full fiscal 2015, the company estimated to generate non-GAAP net income in the range of $1.29 to $1.39 per share and revenue of around $371million to $377 million. Constant Contact previously expected to achieve a non-GAAP net income of $1.38 per share and $388 million in revenue.

Constant Contact CFO Harpreet Grewal said, “The underlying trends coming out of 2014 suggested a path to accelerating revenue growth for the year. However, during the first quarter we experienced unexpected headwinds. We are committed to getting back on the track of consistent, reliable execution and remain committed to driving accelerating revenue growth over time while continuing to expand margins and generate higher cash flow.”

Constant Contact stock rating

Meanwhile, Rosenblatt analyst Kirk Adams downgraded his rating for the shares of Constant Contact to Neutral with a price target of $34 per share. He explained that the downgrade was based on the company’s disappointing revenue for the quarter.

Adams was also concerned with the company’s failure to increase the number of its customers during the quarter. He said, “We feel it is best for investors to look for a lower entry price for the stock. While we still believe that the company will re-accelerate their customer additions later in the year, we think that investors will push the stock price lower before any improvement.”

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