Search experience cloud company Yext, Inc. (YEXT) has gained more than 17% over the past three years. By leveraging its unique business model in which it helps clients ensure that the digital space has accurate, information about them, YEXT’s revenue has increased at a CAGR of 27.7% over the past three years.

Companies such as Yum! Brands, Inc.’s (YUM) Taco Bell, Marriott International (MAR), and Tata Motors Limited’s (TTM) Jaguar-Land Rover among YEXT’s prominent clients.

However, even though the company has completed several developments related to its services, its stock has lost 16% over the past month due to a  broader tech sell-off and its  mixed financial results.

Here are the factors that I think could influence YEXT’s performance in the coming months:

Positive Recent Developments

YEXT’s latest advanced natural language processing (NLP) algorithm, extractive question answering (QA), also known as document search, is expected to be available beginning  March 17 as a part of the company’s ‘Orion’ update.  YEXT has  also collaborated with Carahsoft Technology Corp. to help government agencies provide better access to information as they prepare to distribute  COVID-19 vaccines.

In January, YEXT  made Yext Answers available to select partners in its Channel Partner Program. Also, in January,  the company was named as a leader on the G2 Grid for top Enterprise Search Software products..

Mixed Financials

YEXT’s revenue for the fiscal 2021 fourth quarter (ended January 31, 2021) increased 13.3% year-over-year to $92.19 million. Its gross profit also increased 16.8% year-over-year to $70.60 million for the quarter. However, its  loss from operations was  $19.14 million for the quarter, and its net loss was $18.31 million. Its total comprehensive loss was  $15.95 million.

The company’s revenue projection, which was in the range of $87 million to $89 million for its fiscal 2022 first quarter (ending April 30, 2021), was also disappointing because  it fell short of analysts’ expectations.

YEXT Affected by Broader Tech Sell-Off

The market is witnessing a tech sell off as bond yields continue to rise. The tech-heavy Nasdaq has lost nearly 10% over the past month. Also,  with the U.S.’ passage of a $1.9 trillion COVID-19 relief bill, investors are rotating away from overvalued tech stocks into potential turnaround stocks in the financial, restaurant or manufacturing sectors that are expected to do well in an  economic recovery. Consequently,  YEXT has  also witnessed a sell-off in its shares.

POWR Ratings Don’t Indicate Enough Upside

YEXT has an overall rating of C, which equates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. YEXT has a C grade  for Quality. This is consistent with the stock’s trailing-12-month gross profit margin of 75.6%, which is higher than the industry average  48%. However, YEXT has negative values for ROE and ROA.

The stock also has a C grade for Growth, which is in sync with analysts’ modest revenue estimates. Analysts expect YEXT’s EPS to remain negative in fiscal 2022.

We have also rated YEXT for Value, Momentum, Stability and Sentiment. Get all YEXT’s ratings here.

YEXT is ranked #31 of 60 stocks in the C-rated Software – Business industry.

Better than YEXT: Click here to access several other top-rated stocks in the same industry.

Bottom Line

Because  the digital space is becoming  overloaded with bits and pieces of information, YEXT is expected to thrive this year and beyond based on its unique offerings. However, we think it  wise to wait for the company to build more financial strength and for better entry points in the stock.

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YEXT shares were trading at $14.65 per share on Tuesday morning, up $0.84 (+6.08%). Year-to-date, YEXT has declined -6.81%, versus a 3.65% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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