What happened
TechTarget (NASDAQ: TTGT) stock underperformed this week, falling 17% through Thursday trading compared to a 0.7% decline in the wider market, according to data provided by S&P Global Market Intelligence. The marketing analytics specialist is now in negative territory for the year, down roughly 5% in 2023.
Investors weren't thrilled with TechTarget's latest earnings announcement that blamed increasing macroeconomic pressures for a slower growth outlook.
So what
The company managed solid sales results in the fourth quarter. Sales fell 5% in the period, down to $73 million, which beat management's prior outlook. Yet much of the executive team's letter to shareholders focused on worsening market trends.
Layoffs have hit the sector hard in recent weeks, and that shift is causing many of TechTarget's customers to be more cautious about committing to its marketing services. Demand is especially bad in Europe, although the U.S. market is declining as well.
As a result, TechTarget is focused on cutting costs as sales growth softens. It laid off 5% of its employees in December and is looking to sublease excess office space.
Now what
The company is expecting revenue to decline by between 11% and 14% in fiscal 2023. Cash flow and profitability will remain strong, management predicts, thanks to aggressive cost cuts that include a hiring freeze.
TechTarget still controls impressive competitive assets, including a huge database that shows purchase intent across a wide spectrum of consumers. Its leadership position in this area should allow it to post a solid rebound once the industry begins recovering.
Yet for now, investors are bracing for a period of weaker results that runs through the 2023 fiscal year. It makes sense, then, that Wall Street would send the stock lower in response to the fresh outlook from TechTarget's management team.
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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.
