Shares of restaurant online ordering platform Olo (OLO 5.41%) dropped like a rock on Friday, after the company lowered its revenue guidance for the remainder of 2022. As of 11:30 a.m. ET, Olo stock was down a whopping 33% and is down more than 80% from its all-time high.
Olo's revenue for the second quarter of 2022 was actually what investors should have expected. Previously, management said it would generate Q2 revenue of $45.5 million to $46 million. And in Q2, it generated revenue of $45.6 million, up 27% year over year and inside management's guidance range.
The company ended Q2 with its software being used at 82,000 locations, which was unchanged from the first quarter.
On the conference call to discuss Q2 results, management disclosed that it's in the process of losing business from sandwich chain Subway. Around 2,500 Subway locations left Olo this quarter, with a total of 15,000 locations to be lost before the end of the first quarter of 2023.
If there's any consolation in this news, it's that Subway isn't leaving Olo for a competitor, but rather it's being replaced with Subway's own software. A company Subway's size can do this a lot more easily than most, so the risk of losing other chains in this manner is relatively low.
That said, Olo did lower its full-year revenue guidance. For 2022, it expects to generate revenue of $183 million to $184 million, down from previous guidance of $195 million to $197 million.
Prominent analysts are downgrading Olo stock today in light of this lower guidance. According to The Fly, both Stifel analyst Brad Reback and Piper Sandler analyst Brent Bracelin lowered their price targets to $9 per share, down from $12 per share and $13 per share, respectively.
However, not all is lost. Even at the reduced revenue guidance, Olo expects to grow roughly 18% to 19% in 2022 compared to 2021. And it's in a very healthy financial position with $465 million in cash, cash equivalents, and investments with zero long-term debt. Therefore, Olo management has a solid foundation to stand on while trying to reinvigorate growth going forward.