What happened
Shares of PubMatic (PUBM 1.75%) lost 29.8% of their market capitalization through 10:05 a.m. ET today despite the company having reported a modest earnings beat last night.
Heading into Q2 2023, analysts had forecast the cloud-based ad sales platform would lose $0.06 per share on $59.9 million in sales. PubMatic actually reported a $0.02-per-share profit, however, and sales of $63.3 million.
So what
Investors didn't care.
Even if PubMatic beat its sales number, year-over-year sales growth was still just 0.5%. And even if PubMatic reported a profit where Wall Street expected a loss, it turns out that that profit was only of the pro forma variety, adjusted for one-time items. When calculated according to generally accepted accounting principles (GAAP), PubMatic still suffered a loss. In fact, its GAAP loss for the quarter came to $0.11 per share -- a sharp reversal from last year's Q2 profit of $0.14 per share.
Now what
It gets worse.
Wrapping up the bad news about Q2, management insisted that it is on track to deliver "strong profitability and cash flow this year." Yet the numbers it's promising sound anything but strong.
In Q3, for example, PubMatic says sales will range from only $58 million to $61 million -- down from $64.5 million in last year's Q3. And as for profits guidance, the most management could offer was a promise of "adjusted EBITDA" of $13 million to $15 million. No word on even pro forma net income, much less actual GAAP profits.
Long story short, even if PubMatic had promised earnings in line with what Wall Street is expecting this year -- $0.16 per share -- that would leave PubMatic stock valued at well over 100 times earnings before today's sell-off. And PubMatic isn't even promising it can hit that profits number today.
Investors who are dumping PubMatic stock today, I fear, are making exactly the right call.
