Insights

Why Micro Focus Stock Fell Sharply on Wednesday

What happened

Shares of enterprise software company Micro Focus (NYSE: MFGP) tumbled on Wednesday. The stock fell by as much as 16.9%, and was down by 15.3% as of 3:15 p.m. ET.

The pullback followed the release of the tech company‘s interim results for the six-month period that ended April 30. A year-over-year decline in revenue seems to have spooked some investors. 

So what

Micro Focus reported revenue of $1.3 billion for the period, down 6.8% year over year on a constant-currency basis when excluding Digital Safe (an asset it sold for $63 million) from the comparison. In addition, the company’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) as a percentage of revenue narrowed. The important profitability margin metric came in at 35.4%, compared to 36.7% in the prior-year period. The primary cause for that slimmer margin, management explained, was the decline in revenue.

However, free cash flow for the period was up 36.2% year over year to $190 million.

Now what

Management noted that some of its revenue sources have seen consistent growth more recently, but those gains aren’t showing up in a meaningful way yet in the consolidated results. As such, investors are likely hoping the company can eventually reverse its declining revenue trend. But in the meantime, Micro Focus is also focusing on a cost reduction program, which has already helped reduce its base costs by $150 million on an annualized basis (gross of inflation).

Management also notably said in its press release on Wednesday that it is working to mitigate “increased risks” from the macro-economic environment.

Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool recommends Micro Focus. The Motley Fool has a disclosure policy.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Rebate Rewards

Level 2 Rebate

Deposit $2,000 and get $200 Rebate
$ 200 Rebate
  • 3 Simple Steps
  • 1. Register Using The Link Below (Promo-Code: WEBREBATE)
  • 2. Deposit $2,000 and place one trade at any non-Austalian market within 30 calendar days
  • 3. Receive Your $200 Rebate
Popular

Level 1 Rebate

Deposit $1,000 and get $100 Rebate
$ 100 Rebate
  • 3 Simple Steps
  • 1. Register Using The Link Below (Promo-Code: WEBREBATE)
  • 2. Deposit $1,000 and place one trade at any non-Austalian market within 30 calendar days
  • 3. Receive Your $100 Rebate

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex Securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

EASY QUALIFICATION & LOW ENTRY
NEW CLIENT REBATE OFFER
EARN UP TO $200 CASH REBATE
Act Fast - Promotion Ends In
Click Here To Get Started
EASY QUALIFICATION & LOW ENTRY
NEW CLIENT REBATE OFFER
EARN UP TO $200 CASH REBATE
Act Fast - Promotion Ends In
Click Here For More Info