Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Plantronics Are Down Today

By Lou Whiteman – Updated Apr 16, 2020 at 4:23PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The pandemic created near-term opportunities for the headset maker, but investors need to also focus on longer-term challenges.

What happened

Shares of Plantronics (POLY) were down 22% on Thursday as investors had time to digest the headset and videoconferencing hardware manufacturer's updated guidance. The company in the near term appears to be one of the beneficiaries of the pandemic-forced work-from-home movement, but at least one big Wall Street bank sees trouble on the horizon.

So what

Plantronics, which goes by Poly, on Wednesday raised its fiscal fourth-quarter revenue guidance to a range of $395 million to $405 million, up from $354 million to $394 million, citing increased demand for its headsets.

"Widespread mandatory stay-at-home orders across the globe have created a surge in the number of individuals working from home or from remote locations," the company said. "Correspondingly, Poly saw a near-term increase in demand for its enterprise headsets."

An office phone system on a desk.

Empty offices mean more money for Plantronics. Image source: Getty Images.

But longer term, the COVID-19 pandemic could cause issues for the business if it leads to a recession and causes companies to downsize and cut their IT budgets. Plantronics acknowledged the risk, saying it believes the $226 million in cash it had on hand as of March 28 is "sufficient liquidity to fund its operations and meet its financial obligations."

Still, Plantronics said it is suspending its dividend, which will save $25 million annually, and has deferred debt payments until the first quarter of fiscal 2021. The company also said it was looking to reduce expenses and right-size its cost structure, with plans to provide more details when it releases quarterly results in May.

Now what

Plantronics is also fighting issues in its supply chain. On April 14, the company's factory in Mexico was closed when that country began a shelter-in-place order, and it is not expected to reopen until the end of the month. That's the primarily manufacturing site for Plantronics' headsets.

All in, while there is reason for short-term optimism, Plantronics is going to be among the many companies hit hard if we end up in a recession. Plantronics shares had nearly doubled in value over the last month on the near-term optimism, causing Morgan Stanley analyst Meta Marshall to downgrade the shares to underweight from equal weight in anticipation of the tough road ahead.

Lou Whiteman 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Plantronics, Inc. Stock Quote
Plantronics, Inc.
POLY

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.