Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Avaya Holdings Jumped Today

By Timothy Green – Updated Aug 10, 2020 at 12:39PM

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

A revenue beat and solid guidance propelled the stock higher.

What happened

Shares of Avaya Holdings (AVYA -21.57%) surged on Monday after the communications software company reported its fiscal third-quarter results. Avaya beat analyst expectations for revenue and provided guidance that was ahead of estimates. The stock was up about 15.8% at 11:50 a.m. EDT today.

So what

Avaya reported third-quarter revenue of $721 million, up 0.6% year over year and nearly $34 million higher than the average analyst estimate. Earnings per share came in at $0.08, up from a loss of $5.70 in the prior-year period. Avaya signed 104 deals during the quarter worth over $1 million, including 7 deals that were worth over $10 million.

A rising chart.

Image source: Getty Images.

Software and services now account for 89% of total revenue, while recurring revenue makes up 64% of total revenue. The company's subscription offering, which launched in the first quarter, has booked roughly $200 million of total contract value since launch.

Now what

For the fiscal fourth quarter, Avaya expects to generate adjusted revenue between $720 million and $740 million, along with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) between $170 million and $190 million. Analysts were expecting revenue guidance of around $694 million.

Avaya also beat expectations for its full-year guidance. The company predicted adjusted revenue between $2.84 billion and $2.86 billion, ahead of the $2.78 billion analysts were expecting. Avaya expects to generate adjusted EBITDA for the full year between $680 million and $700 million.

While Avaya's revenue growth was sluggish in the third quarter, the company's results easily beat expectations. Including Monday's rally, the stock is up nearly 17% since the start of the year.

Timothy Green 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.

Premium Investing Services

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