Insights

Why Paymentus Holdings Stock Was Plunging Today

What happened

Shares of Paymentus (NYSE: PAY), a cloud-based bill payment software company were falling Thursday after the company delivered its second-quarter earnings report and slashed its 2022 guidance.

As a result, the stock was down 29.4% as of 1:15 p.m. ET.

So what

Paymentus said second-quarter revenue increased 28.3% to $120 million, which topped analysts’ estimates of $117.8 million. Transactions were up 39.4% to 89.5 million, and gross profits rose 24% to $35.8 million.

On the bottom line, adjusted EBITDA for the Bill.com competitor fell from $8.3 million to $5 million, and it broke even on adjusted earnings per share. That was down compared to its adjusted profit of $0.01 per share in the year-ago quarter, and missed the consensus estimate for $0.01 per share this time as well.

“Paymentus had another quarter of strong growth driven by an increase in transaction volume of over 39%,” CEO Dushyant Sharma said. “We continue to see strong momentum in sales growth, crossing 125 deals closed in 2022.”

While those second-quarter results were solid, management trimmed its full-year guidance. It now expects revenue in the range of $485 million to $492 million, down from a prior forecast range of $492 million to $497 million. It also cut its forecasts for contribution profit and EBITDA. 

Now what

Exacerbating Thursday’s sell-off of the software-as-a-service (SaaS) stock was a downgrade from Goldman Sachs. Analyst Will Nance lowered his rating from buy to neutral and cut his price target on the stock from $19 to $16, noting that a delayed implementation for large billers seemed to be the reason for the guidance cut. That execution issue could lead investors to become more skeptical about the stock.

Like other SaaS stocks, Paymentus has plunged over the last year. It’s now down by about two-thirds from its December peak. It’s trading at a price-to-sales ratio of just 3, which is cheap for a cloud stock, especially compared to peers like Bill.com. If Paymentus can reaccelerate its growth, the stock could have significant upside from here, but management’s guidance indicates that it faces near-term challenges.

Jeremy Bowman has positions in Bill.com Holdings, Inc. The Motley Fool has positions in and recommends Bill.com Holdings, Inc. and Goldman Sachs. The Motley Fool has a disclosure policy.

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