Here's Why Olo Stock Got Creamed Today

Shares of restaurant-technology company Olo (OLO 3.31%) got creamed on Tuesday after the company reported financial results for the third quarter of 2023. If you only looked at the numbers, you might think that the stock would be up today. But it looks like the market is concerned about the company losing a really big customer. And that's why Olo stock was down 23% as of 11:45 a.m. ET, sinking to an all-time low.

What went right and what went wrong

In Q3, Olo generated revenue of $57.8 million, up 22% year over year and ahead of management's guidance of $56 million to $56.5 million. There are now 78,000 restaurant locations using the company's platform, up 1,000 from the previous quarter. And average revenue per unit that uses its platform increased 33% year over year to $742.

In other words, more restaurants are using Olo, the company is making more money per location, and its revenue is consequently growing at a strong rate.

However, chicken restaurant chain Wingstop mentioned last week that it's built its own technology platform for ordering. And Olo's management confirmed that Wingstop may not renew its contract when it runs out in the first quarter of 2024.

With nearly 2,000 locations, Wingstop is one of the biggest restaurant fish in the sea. And losing it has the market feeling down about Olo.

Is this becoming a troubling trend?

Olo's management raised its full-year revenue guidance after reporting Q3 results. Management expects to generate revenue of at least $223.8 million in 2023, which would be up almost 21% from 2022.

Olo's management was quick to point out that Wingstop represents less than 3% of its business and it doesn't believe losing Wingstop is "material" for shareholders. However, it reminds me of when Olo lost Subway's business in 2022.

Olo tries to win business from large restaurant chains like Subway and Wingstop. But the problem is that these larger chains often have the resources to take things in-house if they so choose. Olo shareholders hope that this isn't a trend that continues in coming quarters and years.