What happened
Shares of BILL (BILL 0.79%), the SMB payments specialist formerly known as Bill.com, pulled back in 2022, trending with a broad sell-off in software-as-a-service (SaaS) stocks. BILL delivered strong results throughout the year, but a high valuation and a lack of GAAP profits weighed on the stock, and shares finished down 56% last year according to data from S&P Global Market Intelligence.
As you can see from the chart, the stock plunged in the spring following its third-quarter earnings report and stayed down through the rest of the year.
So what
BILL's worst stretch of the year came during a three-session span from May 4 to 9, when the stock lost 38.5% after its fiscal third-quarter earnings report came out.
Oddly, the company actually beat estimates in the report, with revenue jumping 179% to $166.9 million, following its earlier acquisitions of Divvy, an expense management software company, and Invoice2Go, an invoicing and expense-tracking tool for SMBs. That figure beat estimates at $157.9 million. Organic growth was strong as well, rising 74%.
On the bottom line, the company reported an adjusted loss per share of $0.08, which compared to an adjusted loss per share of $0.02 -- better than the analyst consensus of $0.16 per share.
What seemed to prompt the sell-off was BILL's fourth-quarter guidance, which called for year-over-year revenue growth of 133% to 134%, to $182.3 million to $183.3 million. While that was better than analyst estimates at $168.4 million, it only represented sequential growth of 10%, showing management expects its growth rate to slow.
BILL was also handicapped by coming into the year trading at a lofty price-to-sales ratio near 50, and those valuations came crashing down over the past year as interest rates rose and investors subsequently balked at unprofitable growth stocks like BILL and many of its software-as-a-service peers.
NYSE: BILL
Key Data Points
Now what
Going into 2023, BILL's long-term growth opportunity still looks promising, as it's consolidating market share in the SMB payments sector through a roll-up acquisitions strategy as well as organic growth. The company says it's generally competing with paper and Microsoft's Excel when it signs up new businesses, which helps explain its rapid growth rate.
BILL's recent earnings report was also promising, with guidance calling for revenue growth of 55% to 57% to $1 billion, meaning it trades a more reasonable price-to-sales ratio of just over 10 based on that forecast.
If BILL can maintain that strong growth trajectory, the stock should recoup at least some of last year's losses in 2023.
