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Why Synchronoss Technologies Stock Dropped 24.5% in March

By Steve Symington – Apr 9, 2019 at 5:41PM

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The enterprise software company fell after a weak quarterly report last month. But is the worst over?

What happened

Shares of Synchronoss Technologies (SNCR -6.50%) fell 24.5% in March, according to data from S&P Global Market Intelligence, after the cloud-based enterprise messaging specialist announced disappointing fourth-quarter 2018 results.

Synchronoss plunged nearly 19% on March 13 alone, the first trading day after its quarterly report hit the wires. In it, Synchronoss revealed its quarterly revenue slumped 22.7% year over year to $82.1 million, translating to a net loss of $101.9 million, or $2.56 per share. To be fair, management explained the latter figure included a $109.1 million non-cash impairment charge resulting from the company's year-end balance sheet assessment. But even then, revenue missed analysts' consensus estimates by around $5 million.

Man in suit watching red arrow chart crash through a concrete floor


So what

That's not to say Synchronoss management was disappointed. Rather, they focused on the company's efforts to bolster recurring revenue -- which made up around 83% of total sales during the quarter -- following a restructuring, being forced to restate several years of financial results, and ultimately taking the right steps to pull off what analysts had at one point pronounced would be a "Herculean" turnaround.

"During 2018, we stabilized and reset our core business, aligned the entire team towards our key priorities and core values, and evolved our platforms and product roadmaps to meet customer needs," stated Synchronoss CFO David Clark. "As a result of those actions, we made a great deal of progress to improve operating leverage and profitability, drive free cash flow, and reduce debt."

Now what

Indeed, Synchronoss has recouped some of its post-earnings decline since, at one point climbing nearly 12% on no news the following week in a likely indication that some investors took advantage of the pullback.

Of course, Syncronoss could always extend last month's losses on any signs of weakness in these early stages of its turnaround. But if it manages to continue taking steps in the right direction, I think it could just as easily rocket higher from here.

Steve Symington 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.

Stocks Mentioned

Synchronoss Technologies Stock Quote
Synchronoss Technologies
$0.79 (-6.50%) $0.05

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