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Why Yalla Group Stock Got Crushed Today

By Rich Smith – Aug 10, 2021 at 3:36PM

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Earnings miss, and guidance disappoints.

What happened

Shares of Dubai-based Middle Eastern and North African social networking company Yalla (YALA -5.04%) got destroyed today, tumbling 18.7% through 3 p.m. EDT after reporting less revenue than analysts had predicted for its fiscal second quarter 2021 -- and much less profit.

Heading into Q2, Wall Street had forecast $0.17 per share in profit on sales of $68 million for Yalla. As it turned out, the company earned only $0.10 per share, and sales were $66.6 million.    

Big red arrow going down over a stock chart.

Image source: Getty Images.

So what

But was that really so bad?

Yes and no. On the one hand, despite missing expectations by a bit, Yalla's sales grew 110% year over year, which sounds pretty good to me. On the other hand, profits didn't grow nearly as fast. While management argued that "non-GAAP net income" more than doubled to $32.1 million, when calculated according to generally accepted accounting principles (GAAP), total net earnings were up only 15% in comparison to last year's Q2 -- and earnings per share, diluted, declined 17%.

Now what

Adding insult to injury, Yalla guided investors to expect revenue between $67 million and $72 million in Q3. Wall Street, however, had told investors that $72.8 million would be the magic number -- so even if Yalla's prediction represents greater than 100% sales growth in Q3, this new guidance still amounts to a prediction that it will miss sales next quarter.

Combined with the big earnings miss from Q2, it's no wonder investors were disappointed by this news.

Rich Smith 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.

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Yalla Group Limited Stock Quote
Yalla Group Limited
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