Why Upland (UPLD) Shares Are Getting Obliterated Today

Max Juang /
2024/02/23 12:00 pm EST

What Happened:

Shares of business automation software provider Upland Software (NASDAQ: UPLD) fell 37.9% in the morning session after the company reported fourth-quarter results and provided revenue guidance for the next quarter and full year, which fell below Wall Street's expectations, suggesting a slowdown in demand. Non-GAAP EPS also missed during the quarter, while revenue beat by a narrow margin. 

As a reminder, Upland's growth is expected to continue to be impacted by the ongoing plan to sunset some of its legacy products. The company gave some insights on how the plan is expected to unfold during its Q4'2022 earnings: "The sunset assets represent an estimated 10% of our 2023 revenue and will represent a smaller percentage of our revenue each year thereafter. Upon execution of this plan, what we're going to end up with is a company that can grow both organically and through acquisitions with that growth supporting margin expansion and increased shareholder value." Excluding the impact of these legacy products, the company is expected to achieve core organic growth rate of roughly 3% in 2024. However, the market is likely still struggling to digest the impacts of the ongoing development as the full year growth guidance also implied continued growth deceleration, and the stock is down as a result.

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What is the market telling us:

Upland's shares are quite volatile and over the last year have had 51 moves greater than 5%. But moves this big are very rare even for Upland and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The biggest move we wrote about over the last year was 10 months ago, when the stock gained 6% on the news that the company reported first-quarter revenue, earnings per share, and free cash flow that exceeded analysts' expectations. However, revenue guidance for the next quarter was below Consensus, though the full-year guidance beat. Overall, it was a decent quarter for the company, and considering the positive reaction to the results, it seemed the market was less focused on the soft near-term outlook and reassured that the full year guide was fine.

Upland is down 32.5% since the beginning of the year, and at $2.85 per share it is trading 67.4% below its 52-week high of $8.73 from February 2023. Investors who bought $1,000 worth of Upland's shares 5 years ago would now be looking at an investment worth $81.19.

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