What happened
TechTarget (NASDAQ: TTGT) shares were down sharply on Thursday, falling 14% by noon compared to a 0.3% increase in the S&P 500. The slump put the marketing analytics provider in negative territory for the year and added to big declines that investors saw in 2022. TechTarget's stock is down over 50% in the past full year.
The slump came as Wall Street reacted to management's new, less optimistic growth outlook.
So what
TechTarget said in a pre-market release that revenue fell 5% to $73 million in the selling period that ran through late 2022. That result surpassed the short-term outlook that management issued in early November calling for sales to land between $70 million and $72 million. However, executives were clear about the fact that the industry has hit a bumpy stretch.
"The technology market has materially worsened since November," executives said while describing more challenges in attracting new business. This pressure showed up most clearly in TechTarget's ratio of average contract spending. Existing customer spending came in at a 100% rate for 2022 compared to the prior year, down from 150% in the prior year and 120% in 2020.
Now what
Management projected that sales in the first quarter will land between $56 million and $58 million, which is lower than the $65 million most Wall Street pros were expecting. The main investor worry is that the pressure will climb if a recession develops in key markets like the U.S.
TechTarget is consequently focusing on cost-cutting. The company aims to remain profitable in Q1 despite the growth slowdown. Yet investors should brace for potentially weak earnings results over the next several quarters due to declining spending plans by many tech companies.
In the meantime, TechTarget plans to do its best to ensure that its existing clients are getting plenty of value out of its services. "We are staying very close to our customers during this uncertain period," executives said in a letter to shareholders.
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Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
