What happened
Wednesday is turning out to be a not fun day to own shares of Avaya Holdings (AVYA) stock. Heading into the fiscal first quarter of 2022, analysts had forecast that the cloud communications software provider would earn $0.68 per share on sales of more than $736 million. Instead, Avaya reported this morning that it earned only $0.42 per share, and on sales of just $713 million.
As of 1:20 p.m. ET, Avaya stock is down 20.7%.
Image source: Getty Images.
So what
Despite more than doubling its OneCloud annualized recurring revenue year over year, total revenue at Avaya still slipped 4% year over year in the fiscal year's first quarter, and gross profit margin tumbled 420 basis points to 51.8%.
Avaya missed its profit target and, arguably even worse, even the $0.42-per-share profit it did earn was only a pro forma number. When calculated according to generally accepted accounting principles (GAAP), Avaya lost $0.79 per share -- a performance 13 times worse than its $0.06-per-share loss a year ago.
In short, it was miserable news all around, and things could get even worse before they get better.
Now what
Giving new guidance for the fiscal second quarter, for example, Avaya warned that earnings will probably range from $0.58 to $0.66 per share (pro forma) -- all numbers below the $0.68 per share target that Wall Street has set.
For the full year, too, there's no joy in Mudville (or Durham, North Carolina), with Avaya shaving at least $0.13 off its fiscal 2022 forecast and predicting it will earn only $2.72 to $2.88 (again, pro forma) this year -- also below the $2.98 per share that analysts are expecting. All the damage, moreover, seems to be coming from squeezed profit margins, because the company's revenue forecast for about $3 billion (which is the same as Wall Street expects) remains intact.
No wonder investors are upset.
