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Why Cornerstone OnDemand Stock Plummeted Tuesday

By Daniel Sparks - Feb 25, 2020 at 1:39PM

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The software-as-a-service company's weaker-than-expected guidance for the first quarter spooked investors.

What happened

Shares of software-as-a-service specialist Cornerstone OnDemand (CSOD) were slammed on Tuesday following the company's fourth-quarter results.

While Cornerstone's fourth-quarter revenue and non-GAAP (adjusted) earnings per share were better than expected, a soft outlook for first-quarter revenue seems to have raised concerns for analysts and spooked investors

A chalkboard sketch of a chart showing a stock price moving lower

Image source: Getty Images.

So what

Cornerstone OnDemand reported fourth-quarter revenue of $149.6 million, up 8.2% year over year. The human capital management software company's non-GAAP earnings per share was $0.43, up from $0.24 in the year-ago quarter. Analysts, on average, were expecting revenue and non-GAAP earnings per share of $146.2 million and $0.34, respectively. 

But guidance for revenue between $147 million and $150 million in Q1 was well below analysts' consensus forecast for $157.7 million. 

Following the report, one analyst lowered his 12-month price target for the stock but kept a buy rating, and two other analysts downgraded shares from outperform and buy ratings to perform and neutral, respectively.

Now what

Cornerstone's first-quarter revenue outlook implies 6% year-over-year revenue growth at the midpoint of the guidance range. Management also said it expects subscription revenue to rise to between $143 million and $145 million, implying 9.7% year-over-year growth at the midpoint.

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Cornerstone OnDemand, Inc. Stock Quote
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