Shares of healthcare professional network Doximity (NYSE:DOCS) jumped 29% in the morning session after the company reported a classic "beat and raise" quarter that investors love. Third quarter results beat Wall Street's expectations for revenue and handily beat expectations for Adjusted EBITDA and EPS. Additionally, it was good to see Doximity's optimistic revenue and adjusted EBITDA guidance for the next quarter, which exceeded analysts' expectations. Lastly, revenue and adjusted EBITDA guidance for the full year were both raised from the previous outlook given last quarter. Overall, we think this was a strong quarter with no major flaws that should satisfy shareholders.
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What is the market telling us:
Doximity's shares are very volatile and over the last year have had 15 moves greater than 5%. But moves this big are very rare even for Doximity 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 3 months ago, when the stock dropped 23.5% on the news that the company reported first quarter results with revenue guidance for the next quarter coming in below analysts' expectations and indicating a pretty significant slowdown in growth. The full year guidance also missed and was lowered, which isn't a good sign for a company that bulls argue is still very early in penetrating a large and growing addressable market.
On the other hand, revenue and earnings per share both came in ahead of Consensus during the quarter. Gross margin and free cash flow also improved compared to the previous quarter. In addition, the company announced a plan to reduce headcount by approximately 100 employees, representing 10% of its workforce. This is aimed at simplifying its operations and better aligning its resources with business goals. The estimated cost of the restructuring effort is projected to fall within the range of $8 to $10 million, with the main portion anticipated to be concluded during the second quarter of fiscal year 2024.
Overall, it was a weaker quarter for the company, with the results largely falling below Consensus. At the same time, the announced restructuring effort could provide some assurance that profitability might improve in the coming quarters.
Doximity is down 30.1% since the beginning of the year, and at $22.91 per share it is trading 42.2% below its 52-week high of $39.66 from February 2023. Investors who bought $1,000 worth of Doximity's shares at the IPO in June 2021 would now be looking at an investment worth $433.40.
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