Why Concentrix Stock Ended Up Moving Higher Today
Key Points
Concentrix’s fiscal third-quarter revenue missed analysts’ estimates.
The shortfall, however, reflects a shift in paying customers’ preferences rather than a loss of customers.
After the revenue shock ran its course, investors priced in the impressive earnings beat.
If you want proof that investors are capable of jumping to the wrong conclusion, look no further than today's price action from shares of technology outfit Concentrix (NASDAQ: CNXC). Down as much as 8.6% from Tuesday's close early on in today's trading session, as of 2:38 p.m. ET this tech stock is up 3%.
What happened? The market was fully prepared to price in the company's fiscal Q3 revenue shortfall reported after Tuesday's close. With a bit more time to think about the context of the sales miss, however, investors turned their focus to the fact that Concentrix beat analysts' earnings estimates for its third fiscal quarter.
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Not quite the concern investors initially felt
Concentrix turned $2.45 billion in sales into an adjusted per-share profit of $2.92 for the three months ending in August. Although earnings were up 5% from the year-earlier comparison of $2.78 and easily topped estimates of $2.71, revenue fell 1.2% year-over-year, also falling short of analysts' expectations for a top line of just under $2.48 billion.
In an environment where most stocks are priced for perfection, even the slightest shortcoming can prompt panic.
Image source: Getty Images.
Last quarter's sales miss doesn't actually reflect the headwind many investors initially assumed it did, however. As CEO Christopher Caldwell explained during Tuesday afternoon's Q3 earnings conference call, two of its hyperscale clients dialed back the scale of their service from Concentrix, while a handful of customers switched to lower-cost artificial intelligence offerings. This shift is expected to persist for a while too, resulting in a 3% to 5% year-over-year decrease in revenue for the fourth fiscal quarter currently underway.
While the knee-jerk response was bearish, having some time to consider the fact that earnings will still hold up compared to last year's Q4 bottom line of $2.95 per share, investors opted to buy back in, taking advantage of the stock's year-to-date pullback of 38%.
Not right for everyone, but maybe right for you
Shares of the customer -interaction technology name are still speculative to be sure, and not a good fit for all portfolios.
If you can stomach the risk and understand the company's place within the AI-enabled customer service platform, though, Concentrix shares are still priced at an attractive discount even after today's sizable bullish swing.
And for what it's worth, the analyst community collectively says this ticker is worth $33.50 per share, up more than 30% from its current price.
James Brumley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.