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Why On24 Stock Just Crashed 29%

By Rich Smith – Aug 11, 2021 at 12:46PM

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The company beat earnings in Q2, but it might not be so lucky next time around.

What happened

Shares of recent IPO and would-be Zoom Technologies rival On24 (ONTF -1.58%) crashed Wednesday, falling 29% as of noon EDT despite the company reporting an apparent earnings beat last night.

Analysts had forecast that On24 would only break even in the fiscal second quarter, with sales of $51 million. As it turned out, the company did more than $52 million in business and earned (pro forma) profits of $0.04 per share.  

Big red arrow going down over a stock chart.

Image source: Getty Images.

So what

On24 reported 43% year-over-year growth in sales for the quarter even as the company says its business shifted from "peak of Covid" (which is a good environment for videoconferencing) to "peak of vaccinations" (which you would expect to be bad for business).

And indeed, despite the revenue surge, it was pretty bad -- at least from a profits standpoint. After On24 earned $0.14 per share a year ago, its earnings when calculated according to generally accepted accounting principles (GAAP) crashed to a $0.05-per-share loss -- pro forma profits notwithstanding.  

Now what

Heedless of the GAAP loss, On24 management declared that "our category leadership grows," insisting that "our future is more exciting than ever before." And yet, the company's guidance doesn't really reflect that sentiment.

Management guided to revenue of no more than $48.5 million in Q3 (Wall Street wants to see $51.2 million) and no more than $204.2 million for the full year -- when analysts will be looking for more than $209 million. Similarly, On24 predicted it will incur pro forma losses of about $0.08 per share for next quarter and $0.09 for the year -- both of which are about twice as bad as what analysts were forecasting.

No wonder investors are upset.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Zoom Video Communications. The Motley Fool has a disclosure policy.

Stocks Mentioned

ON24, Inc. Stock Quote
ON24, Inc.
$7.47 (-1.58%) $0.12

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