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Why FTD Companies' Stock Slumped 12.5% in September

By Timothy Green – Oct 10, 2016 at 10:53AM

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The floral and gifting company received an analyst downgrade following two quarters of lackluster performance.

Image Source: FTD Companies.

What happened

Shares of floral and gifting company FTD Companies (FTD) slumped 12.5% in September, according to data provided by S&P Global Market Intelligence. The main trigger for the decline was an analyst downgrade on Sept. 16.

An analyst for B. Riley & Co, one of just four firms covering the stock, downgraded FTD  to neutral from buy, which sent shares of FTD tumbling.

So what

Prior to the downgrade, FTD had reported year-over-year declines in revenue for two straight quarters. During the latest quarter, revenue was off 7.4% to $338.6 million, driven by weak results in its consumer and provide commerce segments. For the full year, the company expects a 5% to 7% decline in revenue, with net income of just $4 million to $8 million.

Shares of FTD have tumbled since the company went public in 2013, and are now down more than 40% from their peak. The downgrade may have prompted the recent sell-off, but the company's lackluster performance is to blame for the prolonged slump in the stock price.

FTD Chart

FTD data by YCharts

Now what

Despite its poor performance in recent quarters, CEO Robert Apatoff says he remains confident in FTD's strategy:

"We are pleased with the growth in revenues across our International and Florist segments as well as our gifting brands, however, we faced topline headwinds in our U.S. floral businesses that impacted our overall second quarter financial performance. While we expect it will take time to fully realize the benefits of our strategic initiatives across our floral businesses, we remain confident in our ability to deliver future growth in revenues in these businesses, over the long-term. We also remain intently focused on enhancing our strong profitability, margins and cash flow and delivering shareholder value."

It's usually best for investors to ignore analyst upgrades and downgrades. In this case, the downgrade came only after it was clear that the company was having problems. Going forward, FTD will need to find a way to return to growth in order to win back investors.

Timothy Green has no position in any stocks mentioned. The Motley Fool recommends FTD Companies. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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