Investors abandoned LivePerson (LPSN -2.57%) stock on Friday, with shares falling 26% by 3 p.m. ET in response to the software specialist's fourth-quarter earnings announcement. The company, which develops cloud-based communication products, said sales growth will slow in early 2022 and stay modest through most of the fiscal year ahead.
It might be tempting for investors to see the stock as an attractive rebound opportunity after shares declined 70% in the past full year (and 50% so far in 2022). LivePerson is still a growing business, after all, with solid earnings prospects. But the operating picture is cloudier today.
Management said in the Q4 report that changes in the economic climate are hurting growth. Many employees are returning to offices, and some businesses that had been pushed online in earlier phases of the pandemic are now heading back to in-person settings .
CEO Robert LoCascio and his team said it was prudent to forecast another quarter of slowing growth in Q1 "in light of the evolving macroeconomic environment, including shifts in consumer shopping behavior." Management implied that the shift isn't a temporary challenge. They forecast sales of about $555 million in 2022, while most Wall Street pros had been predicting closer to $600 million of revenue.
LivePerson has no shortage of growth opportunities to target, including by moving into complementary services like voice communication. There's no sign that its platform is losing market share to bigger enterprise giants, either.
Still, it appears that more of its growth in 2022 will come from maximizing relationships with existing customers, whereas gains through most of the last two years involved serving soaring demand for new digital workflows.
Investors can still see great returns from owning that type of business, but it's a different growth profile now that annual sales gains are falling below 20% after rising 28% last year and 26% in 2020.
As a result, look for LivePerson to stress margins, cash flow, and profitability over the next year as it works to consolidate the market-share gains it has made over the last two years.