Freshworks (FRSH 0.69%) stock suffered big sell-offs over the past week's trading in response to the company's latest earnings report. The software specialist's share price fell 18.8% over the stretch.
Freshworks published its fourth-quarter results after the market closed on Feb. 10 and actually reported sales and earnings for the period that beat Wall Street's expectations. Despite the performance beats, investors weren't satisfied with the company's forward guidance and sold out of the stock.
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Freshworks sank amid another tough week for software stocks
In last year's fourth quarter, Freshworks achieved non-GAAP (adjusted) earnings per share of $0.14 on sales of $222.7 million. Adjusted earnings per share came in $0.03 ahead of the average Wall Street target, and sales topped the average analyst estimate by roughly $3.9 million.
Even with better-than-expected Q4 performance, the stock lost ground amid bearish momentum for the broader market. The S&P 500 fell 1.4% over the last week of trading, and the Nasdaq Composite fell 2.1%. Many software stocks were hit particularly hard in last week's market pullback, continuing a trend that has seen investors broadly become more cautious about the industry.
NASDAQ: FRSH
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What's next for Freshworks?
Freshworks is guiding for sales in the first quarter to be between $222 million and $225 million. Meanwhile, full-year sales are projected to be between $952 million and $960 million. With the company targeting annual revenue growth of roughly 14% this year, management's guidance wasn't bad -- but investors have become more selective when it comes to software stocks.
The software industry has seen big valuation pullbacks recently in response to concerns about growth-dependent valuation multiples and the potential for AI-driven disruption. While this trend could create some worthwhile buying opportunities, volatility could continue in the near term.
