Yext Soars on Strong Earnings, Riding the AI Wave
June 7, 2023: Yext (YEXT) Shares skyrocketed after the company exceeded expectations in its first-quarter results and raised its full-year guidance. The marketing-software firm is positioning itself as a generative artificial intelligence (AI) player and has benefited from workforce reductions.
On Wednesday, Yext shares surged by 41% in early trading, reaching $13.58 per share. This represents the largest daily percentage gain ever recorded for the stock, which has already more than doubled this year.
This impressive performance is a much-needed boost for a company striving to turn things around. Former CEO Howard Lerman stepped down last year amid challenges in achieving growth, resulting in the stock hitting its lowest levels since its initial public offering in 2017.
Yext reported that it achieved breakeven on a per-share basis for the first quarter ending April 30, compared to a loss of 20 cents per share during the same period the previous year. Adjusted for one-time items, Yext earned 9 cents per share. Revenue also increased by 1% to $99.5 million.
According to FactSet, analysts had forecasted an adjusted profit of 5 cents per share on sales of $98.5 million, making Yext’s results even more impressive.
The company’s executives emphasized that the positive results demonstrate increased efficiency following workforce reductions of approximately 8% earlier this year. They also highlighted the company’s efforts in AI.
CEO Michael Walrath explained during an earnings call, “Our launches of Content Generation Studio and Yext Chat in beta have been catalysts for more in-depth discussions around Generative AI.”
Roth MKM analysts, led by Rohit Kulkarni, upgraded their rating on Yext stock to Buy from Neutral and raised their target price to $12.50 from $8.50. Kulkarni wrote, “We are encouraged by management’s focus on sales execution and profitable growth. Plus, upcoming AI products unlock new total addressable market and could help reposition Yext as the de facto AI partner for large enterprises.”
Yext also revised its guidance for fiscal 2024, projecting revenue from $404 million to $407 million and adjusted earnings per share (EPS) between 28 cents and 29 cents. The previous guidance was for revenue of $402 million to $406 million and adjusted EPS between 22 and 23 cents.
D.A. Davidson analyst Tom White raised his target price on Yext stock to $11.50 from $10, citing better-than-expected expense efficiencies and positive trends in the company’s core business.
While the market has responded positively to Yext’s strong performance, some analysts maintain a neutral stance, recognizing that Yext’s turnaround is still in the early stages and acknowledging the uncertain macroeconomic environment affecting enterprise spending.
