Insights

Why Bandwidth Stock Tumbled Today

What happened 

Shares of Bandwidth (NASDAQ: BAND), an enterprise cloud communications company, were falling today after the company reported its second-quarter financial results. While it reported revenue and earnings that outpaced analysts’ consensus estimates, investors appeared unenthused by the results. 

The tech stock was down by 8.6% at the end of the trading day.

So what 

Bandwidth reported second-quarter revenue of $136 million, which was up 12% from the year-ago quarter and beat Wall Street’s average estimate of $133.6 million. Additionally, the company’s non-GAAP (adjusted) loss per share of $0.04 beat analysts’ consensus estimate of a loss of $0.06 per share. 

Image source: Getty Images.

“I am proud of the operating discipline that enabled us to deliver results that exceeded expectations on both the top and bottom line,” Bandwidth’s CEO, David Morken, said in a press release. 

But despite the company’s report of top- and bottom-line results that beat Wall Street’s expectations, investors may have focused on the fact that its loss of $0.04 in the quarter came in stark contrast to its earnings of $0.32 in the year-ago quarter. 

Tech investors have become increasingly concerned with companies that are losing money right now, and Bandwith’s loss in the quarter may have scared some investors away today. 

With inflation still running at a 40-year high and the Federal Reserve raising rates to bring it down, tech investors are nervous that an economic slowdown is on the horizon. Therefore, companies that aren’t putting up solid earnings are ending up on investors’ chopping block right now.

Now what

Bandwidth issued guidance for the full year, with revenue expected to be in the range between $551 million and $557 million, which would represent an increase of 13% at the midpoint. 

The company’s management said that 2022 non-GAAP earnings will be $0.12 per share at the midpoint, which would be a significant drop from earnings of $0.97 per share in 2021. 

With the company’s earnings in the quarter, and for the full year, seemingly moving in the wrong direction, some investors headed for the doors today. 

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bandwidth Inc. The Motley Fool has a disclosure policy.

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