Why ServiceTitan Stock Is Crashing Today
Key Points
ServiceTitan beat the average analyst estimates for sales and earnings in fiscal Q2.
The company also raised its revenue and operating income targets for the year.
Management's Q3 sales target fell short of expectations.
ServiceTitan (NASDAQ: TTAN) stock is getting crushed in Wednesday's trading. The company's share price was down 30.2%, as of 12:20 p.m. ET. Meanwhile, the S&P 500's level had fallen 0.4%, and the Nasdaq Composite was down 0.6%.
ServiceTitan published its latest quarterly report after the market closed yesterday, and its sales and earnings performance for the period actually topped the average Wall Street estimates. On the other hand, investors were disappointed with the company's forward guidance.
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ServiceTitan's Q2 growth looked encouraging
ServiceTitan recorded non-GAAP (adjusted) earnings per share of $0.40 on sales of $292.8 million in the second quarter of its current fiscal year -- which ended July 31. Sales were up roughly 21% year over year in the period, and earnings per share improved from $0.33 in the prior-year quarter. The average analyst estimate had targeted adjusted earnings per share of $0.35 on sales of $286 million.
The company touted strong demand for its agentic artificial intelligence operating system for construction and home maintenance in the quarter, and the business recorded over $50 million in adjusted free cash flow in the period. Despite solid performance in fiscal Q2, the market didn't like the company's guidance.
What's ahead for ServiceTitan?
For the current fiscal quarter, ServiceTitan guided for sales between $285 million and $287 million -- a range that fell short of the average analyst estimate's call for sales of $288 million. On the other hand, the company actually raised its full-year sales guidance to between $1.139 billion and $1.144 billion -- up from previous guidance for sales between $1.13 billion and $1.14 billion.
Management also hiked its target for operating income to between $152 million and $154 million -- up from its previous target for operating income between $142 million and $147 million. While the company is seeing some deceleration for transaction volume growth, it's possible that the passage of time will show that today's huge sell-off was an overreaction to what otherwise looked to be a solid quarterly report and forecast update.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends ServiceTitan. The Motley Fool has a disclosure policy.