Is Yext Stock A Buy? The Covid pandemic has led to unprecedented economic chaos and market volatility. Under such circumstances, conventional wisdom dictates that you only invest in stocks of those companies that provide essential services and, as such, are most likely to benefit from the contagion.
The stocks of many essential retailers and consumer staples have risen as the demand for their products remain constant irrespective of the condition of the economy. Their price inelasticity is high, i.e., the change in price is not going to tamper with their demand.
However, it is often seen that narrowing your vision and crowding into these “safe” investments often compels you to lose sight of attractive opportunity elsewhere. There is no denying the fact that technology stocks are often deemed riskier when the market is in a turmoil, but Yext [NYSE: YEXT], which describes itself as “Search Experience Cloud” company, should still be on your radar.
We list the reasons for our optimism regarding the company that provides a knowledge engine platform to help businesses control and manage their digital knowledge.
Yext Is A Cloud Platform For Digital Knowledge
Yext Inc. [NYSE: YEXT] is a knowledge engine provider, which engages in delivering brand-verified answers.
It helps businesses exercise control of their facts online by improving the search experience on their websites and across the entire search spectrum. It offers a cloud-based digital knowledge platform, which allows businesses and organizations around the world manage their digital presence in web-based directories and business listings on the internet.
Yext Knowledge Engine enables businesses to control and manage their digital knowledge and makes it available through the PowerListings Network of approximately 175 third-party maps, apps, search engines, intelligent GPS systems, digital assistants, vertical directories, and social networks.
The New York-headquartered company, founded in 2006, serves the healthcare, retail, and financial services industries across the globe.
Is Yext Stock A Buy?
In this fast-paced digital age, we are bombarded with information on a 24×7 basis.
Unfortunately, not every piece of information that reaches us is reliable, accurate or, for that matter, essential. Therefore, it’s of paramount importance to have authenticated answers to questions, and that is where Yext makes its presence felt.
The technology company, in collaboration with companies other and governments, allows end users to get genuine answers when it comes to discovery of new businesses, read online reviews, and find answers to queries.
Yext plays a crucial role in this age of misinformation and disinformation by assuring the general populace that the information they are getting is genuine.
Yext Supports Government Catalog Health Information
The COVID-19 pandemic has brought to the forefront the importance of this service provided by Yext. For example, Alabama and New Jersey, both, entered into a collaboration with Yext to ensure the information their citizens are getting about the coronavirus is genuine.
Powered by Yext Answers, the comprehensive information hub centralizes accurate information and updates about the COVID-19 pandemic.
More recently, the U.S. Department of State used Yext to act as a COVID-19 travel alert and advisory information hub for the entire country, which further attests to the company’s growing expertise in this domain. The company also announced its collaboration with the World Health Organization (WHO) to integrate Yext Answers on its COVID-19 webpage.
Yext Helps Restaurants Manage Menu Updates
Even restaurants are facing the disinformation heat owing to the pandemic. Customers are ordering takeout, but they are finding it increasingly difficult to keep pace with ever-changing restaurant menus.
To deal with this conundrum, a top order software company, Olo, entered into a partnership with Yext to deliver verified menus. Olo is used by hundreds of restaurant chains, which, in turn, again testifies to Yext’s growing importance and worth.
Yext Earnings Are Up
On the earning front, Yext Inc. earned $85.40 million for the three months ended April 30, 2020, as compared to the consensus estimate of $82.14 million. And, if compared to the $68.7 million it earned in the same period last year, this shows an upswing of nearly 24%.
Customer count increased 36% year-over-year to nearly 2,100. Gross profit surged 23% to $64.2 million, against $52.2 million reported in the first quarter of the previous year.
Yext reported a net loss of $29.2 million compared to the net loss of $19.0 million in the same quarter, driven primarily by higher operating expenses, due to an overall increase in employee-related costs.
Yext also issued an update on its second quarter earnings’ guidance. The company issued revenue guidance of $84-$86 million, compared to the consensus revenue estimate of $82.11 million and EPS guidance of ($0.13) -($0.11) for the period, as compared to the consensus EPS estimate of ($0.14).
The stock has moved higher by 7.1% in the past four weeks. Its earnings’ estimate revision has been positive as well, which means you may want to watch it closely for more gains in the near future.
Risks of Investing in Yext
Valuation metrics show that Yext Inc. may be overvalued, which means it may not be a good pick for value investors.
Also, we see it has a five-year beta of 1.49, so, historically, its share price has been volatile. What it means is that Yext shares will outperform the market in times of optimism, but fall faster in times of pessimism.
Moreover, if we discount Yext from a technical perspective and talk about its performance in layman’s terms, we see investors fussing over spending cuts in corporate software spending.
Also, what cannot be discounted is that the service provided by Yext cannot be deemed essential as, say, payroll software.
The firm taking a short-term hit when it comes to customer retention in these volatile times is a distinct possibility.
Then again, new customers like local governments, Olo and even WHO can more than compensate for any potential losses. All in all, analysts are bullish about Yext’s prospects as it gains more and more customers.
Are Yext competitors a threat?
Top competitors in Yext’s space are Yodle, ReachLocal, BrightLocal and Moz. Yodle, founded in 2005 in New York, York is perceived as one of Yext’s biggest rivals.
Yodle operates in the advertising & marketing domain. ReachLocal, founded in 2004 in Woodland Hills, California, competes in the digital marketing & publishing industry. England-based Bright Local specializes in the digital marketing & publishing industry.
That said, Yext continues to be one of the most popular citation management tools available today, having won the trust and confidence of some of the world’s biggest brands.
It is easy and efficient to use, with any changes you make to your listing getting approved within minutes. However, there are a few points where Yext’s competitors can steal a march over it.
For one, it is more expensive than any other citation management tools and, second, you will have to need your in-house SEO team to maximize your digital presence.
Is Yext Stock A Buy: The Bottom Line
Yext, which describes itself as a “search experience cloud company”, is a small company with a small following, but it has been winning new clients lately as well as getting analysts’ attention—factors driving up its stocks’ value. During the COVID-19 pandemic, Yext has been extremely busy, partnering with the government as well as WHO, to provide accurate coronavirus related questions to ensure people have access to official facts.
The company, operating in the Technology Services space, is seeing solid earnings estimate revision activity over the past month, after posting a 24% revenue increase in the first quarter of fiscal 2021.
Recently, William Blair initiated coverage on Yext with an outperform rating, suggesting analysts are optimistic about the firm’s prospects in both, the short and long term.
In fact, over the past month, current quarter estimates have shrunk from a loss of 13 cents per share to a loss of 12 cents per share. Its current year estimates have contracted from a loss of 46 cents per share to a loss of 43 cents per share, indicating Yext’s strong performance in a challenging economic climate.
Apart from the Wall Street, technology giant Adobe also recently recognized Yext for its software solution called Yext Answers.
Yext became the first search technology partner to join the Adobe Exchange program at the premier level, the top tier of Adobe’s technology partner program.
Partnering with a top technology firm like Adobe is likely to enhance Yext’s visibility to an even wider pool of customers, and provide added momentum to its stock price.
To sum it up, if you are looking for a decent pick in a robust industry, Yext strongly demands your attention.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.