NEW YORK (TheStreet) -- Shares of ChannelAdvisor Corp. (ECOM) - Get Channeladvisor Corporation Report are tanking in morning trading, down 53.05% to $9.93 today on heavy trading volume, after the company lowered its fourth quarter 2014 revenue guidance yesterday after the market close.
The provider of software-as-a-service, or SaaS, lowered total revenue guidance for the 4Q14 to $23.7 million, versus its previous guidance of $25.6 million to $26.1 million.
"We saw an unusual shift of gross merchandise volume (GMV) to larger customers this holiday season at the expense of smaller customers," CEO Scot Wingo said.
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"Because larger customers enjoy volume discounts in the form of lower take rates, this shift translated to lower variable subscription revenue, even though overall GMV increased 31% year over year for the fourth quarter. This resulted in fixed subscription revenue for the fourth quarter growing approximately 27% while variable subscription revenue decreased approximately 5% compared to a year ago," he added.
Separately, Stifel Nicolaus downgraded the company to "hold" from "buy" after the announcement, saying, "it is clear it will take several quarters for these changes to work through the model, and given that the company continues to burn cash we believe it could take several quarters before investors return to the name."
About 4.11 million shares changed hands by 10:17 a.m. in New York, compared to the average of 251,100 shares.
TheStreet Ratings team rates CHANNELADVISOR CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate CHANNELADVISOR CORP (ECOM) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, weak operating cash flow and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- CHANNELADVISOR CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. For the next year, the market is expecting a contraction of 23.2% in earnings (-$1.01 versus -$0.82).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has significantly decreased by 109.7% when compared to the same quarter one year ago, falling from -$4.29 million to -$9.00 million.
- Net operating cash flow has significantly decreased to -$2.72 million or 65.61% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 49.27%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 80.00% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- Compared to other companies in the Internet Software & Services industry and the overall market, CHANNELADVISOR CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: ECOM Ratings Report