Shares of real estate management software company AppFolio (APPF 3.55%) dropped on Friday after the company reported its financial results for the fourth quarter of 2024. As of 12:10 p.m. ET, AppFolio stock was down about 8%.
AppFolio keeps growing, but expenses are up
AppFolio's management expected Q4 revenue of $195 million to $199 million. But in Q4, the company generated revenue of $204 million, which was up 19% year over year. Revenue was boosted by a 6% increase in the number of rental units being managed by its software.
NASDAQ: APPF
Key Data Points
One of the biggest negatives in the Q4 report is AppFolio's operating expenses. All of its operating expenses were elevated, which dropped the company's operating profit. Whereas it had $28 million in operating income in the prior-year period, it only had Q4 operating income of $23 million.
This seems to be one of the biggest reason that AppFolio stock was down today.
This is why investors should zoom out
Many investors have heard that they should look at the long term when evaluating businesses, and this is a good example of why that's true. AppFolio's Q4 profit numbers slipped, but for 2024 as a whole, the company improved.
Adjusting the numbers to make things more comparable, AppFolio had adjusted income from operations of $76 million in 2023, but this jumped to income from operations of $200 million in 2024. In other words, it nearly tripled, whereas full-year revenue was only up by 28%. This makes its Q4 underperformance seem inconsequential.
Moreover, looking to 2025, AppFolio is guiding for potential improvement for its operating margin, showing that Q4 is just a temporary blip on the radar. Evaluating whether AppFolio stock is a timely investment today is another discussion. But when it comes to the Q4 report, it was strong, and I believe that disappointed investors are being shortsighted when sizing up AppFolio's business.
