Why Marchex (MCHX) Stock Is Plummeting Today

NEW YORK (TheStreet) -- Marchex (MCHX) was falling 41.7% to $4.37 Thursday after lowering its call-driven revenue for the rest of the 2014.

The marketing company said it now expects $47.5 million to $48.5 million in call-driven revenue for the third quarter 2014. For the fourth quarter of 2014 the company expects call driven revenue of $170 million to $172 million.

The lower call-driven revenue guidance is due to revised commitments from Allstate (ALL) in the fourth quarter. The insurance company is moving towards a fixed fee pay model as opposed to a performance-based model of payment.

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The marketing company will continue working with Allstate as an integration partner using its call analytics technology.

TheStreet Ratings team rates MARCHEX INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate MARCHEX INC (MCHX) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and robust revenue growth. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • MARCHEX INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, MARCHEX INC turned its bottom line around by earning $0.03 versus -$1.02 in the prior year. This year, the market expects an improvement in earnings ($0.18 versus $0.03).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet Software & Services industry. The net income increased by 376.8% when compared to the same quarter one year prior, rising from -$0.35 million to $0.98 million.
  • 36.75% is the gross profit margin for MARCHEX INC which we consider to be strong. Regardless of MCHX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MCHX's net profit margin of 1.97% is significantly lower than the industry average.
  • Powered by its strong earnings growth of 300.00% and other important driving factors, this stock has surged by 27.16% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, MARCHEX INC'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: MCHX Ratings Report

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