Constant Contact (NASDAQ: CTCT) took a figurative bath today. Shares slid to a four-year low in trading, losing nearly 30% in an unprecedented sell-off that sent the Waltham, Massachusetts-based Internet marketing company reeling.
Constant Contact reported its quarterly results Thursday, the effects of which are still being felt by investors well after the bell and into their Friday Fish Fry. While its net income surpassed Wall Street expectations and Constant Contact raised its annual earnings guidance, this failed to buoy revenue reports that were slightly weaker than expected as the company lowered its revenue forecast. However, the company said retention rates, or the rate at which trial users decide to continue to hire Constant for their marketing needs, was lower than expected.
CEO Gail Goodman suggested that she was at fault and that the company’s troubles are due to its poor management of trial period conversions for new customers as well as failing to adequately deal with its recent acquisition of business listings manager SinglePlatform. This announcement failed to console and reassure investors if today’s trading is any indication.
“We’re in the midst of a significant expansion of the Constant Contact product suite,” Goodman said. “The combination of launching and managing multiple products at various stages of growth and the time and attention required in both evaluating and integrating SinglePlatform absorbed leadership bandwidth and resulted in less execution focus and discipline.”
Investors were clearly taken aback by these remarks. One might think that this is precisely the job of a CEO: integrating, multi-tasking and leaving excuses out of conference calls.
Stifel Nicolaus analyst Brad Reback was one of the first to acknowledge this failing as he downgraded the shares to “hold” from “buy” and removed his price target of $28.00 per share. Reback said the company gained about 10,000 fewer subscribers than he expected, and also suggested that the company is simply trying to do too much at once with a management team ill-equipped for this attempt.
This was by no means the sole downgrade of the stock today as a host of analyst downgrades, including Lazard Capital, Credit Suisse, Raymond James and Needham & Company, piled on the misery throughout the day.
Having closed at over $17.00 on Thursday, investors were greeted by a day that was only meant to get worse when Constant opened below $13.00 at $12.76. Trading never rebounded, nor did a $10.00 per share loss ever look to occur. The stock steadily declined without any major fluctuations until it reached its closing price of $11.93, a loss of nearly 30% on the day. Trading was nearly 30 times its average volume over 90 days with over eight million shares traded.
Despite today’s beating, the company remains profitable and various analysts expect an immediate turnaround.
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