Phunware (PHUN -2.23%) stock lost ground Thursday following the release of its fourth-quarter and full-year report after the market closed Wednesday. The share price was down by roughly 7.6% as of noon ET.
The software company's full-year sales came in slightly ahead of analysts' consensus target, but its bottom-line loss was worse. Should investors treat this pullback as an opportunity to buy the stock?
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Potentially explosive, but risky
Phunware's revenue grew by 6.4% in 2021 to reach $10.64 million. But it reported a net loss of $53.52 million last year, which was more than twice the size of its $22.19 million loss in 2020. However, Phunware, which built the mobile app and provided analytics services for Donald Trump's 2020 presidential campaign, anticipates its sales will surge by more than 250% year over year in 2022's first and second quarters.
The company foresees a significant revenue uptick in conjunction with the midterm election cycle. Management also pointed to opportunities in international markets, potential acquisitions, and investments in Bitcoin as catalysts that could bolster performance. The company currently has a market capitalization of roughly $257.5 million and is valued at roughly 10.3 times this year's expected sales.
For a company that could grow sales at a greater than 250% year-over-year clip in the near term, that price-to-sales multiple might actually look pretty attractive. However, its business performance has generally been uneven, and there's a good chance that will continue to be the case.
If Phunware hits its revenue growth targets for Q1 and Q2 and continues to attract clients for its campaign-related services, it wouldn't be shocking to see its share price make significant gains from current levels. However, the long-term trajectory for this business remains difficult to track, and that means the stock probably won't be a great fit for investors without high tolerances for risk and volatility.
