What happened
Investors in Gorilla Technology Group (GRRR -4.17%) had a rough week as shares slumped 39% through Thursday trading. That's as compared to a 0.1% decline in the wider market, according to data provided by S&P Global Market Intelligence. The video analytics and cybersecurity specialist is now down by over 60% so far in 2023.
This week's slump came as investors processed a fourth-quarter earnings report that contained some bad news on growth and profits.
So what
Gorilla Tech has been conducting a major strategic pivot aimed at creating a more sustainable business following its recent initial public offering. In fact, the company is hardly recognizable compared to its prior iteration. It has an entirely new executive team, has changed its product focus, and is marketing toward a new customer base today.
This move resulted in sharp sales declines in 2022 as revenue fell to $22 million from $42 million. "Elements of the transition were difficult," CEO Jay Chandan said in a press release.
Another fallout from the shift was a jump in net losses to $88 million from $9 million a year ago.
Now what
The new executive team has high hopes for the rebound strategy, which involves a bigger focus on cybersecurity and international markets, along with a shift toward higher-value products. Gorilla Tech has already won a few major contracts in these spaces, and these successes are likely to push revenue much higher in 2023. In fact, management projects sales between $65 million and $75 million.
But investors don't have much concrete evidence to rely on besides that optimistic 2023 forecast. Gorilla Tech's new management team is also still building its reputation with shareholders. As a result, the stock is likely to remain highly volatile until investors can see progress in the transformation plan in metrics like sales growth, profitability, and positive cash flow.
