What happened
Shares of expense-management software company Expensify (EXFY 2.86%) crashed on Thursday, following the release of the company's financial results for 2021. Needless to say, investors had expected a little more from this newly public company and a bevy of analysts lowered their official expectations as a result. As of 11:30 a.m. ET, Expensify stock was down almost 14%.
So what
Expensify had its initial public offering (IPO) in November, so it hasn't been a public company very long. But it's certainly off to a tepid start with investors. For 2021, it generated revenue of almost $143 million, which was up 62% year over year and close to expectations. However, it's only guiding for revenue of $38.6 million to $39.6 million for the first quarter of 2022, a drop in revenue from the fourth quarter of 2021.
Image source: Getty Images.
Perhaps the weightier issue on investors' minds is Expensify's Q1 guidance for average monthly paid members between 684,000 and 702,000. This would be a drop from the 711,000 paid members it had at the close of 2021.
With apparently slumping growth, the analyst community is out in full force today lowering price targets. For example, Brent Bracelin with Piper Sandler lowered their price target for Expensify stock by a whopping 44%, from $45 per share to $25 per share, according to The Fly.
Now what
While Expensify management is guiding for a sequential decline in revenue and paid members, perhaps investors should also consider the year-over-year gains. In the first quarter of 2021, the company had 631,000 paid members and generated revenue of $29.7 million. Therefore, if management hits the low end of its first-quarter guidance, these two areas would grow 8% and 30% year over year respectively.
Still, that growth might not be hot enough to justify Expensify stock's valuation in the minds of most investors. Even after today's crash, it trades at a market capitalization of $1.3 billion, meaning it trades at a trailing price-to-sales ratio of 9. That valuation may still be too much for many investors, considering its growth rate.
