Woodland Hills’ ReachLocal, an online marketing firm catering to small businesses, saw its stock price plummet nearly 30 percent in two days after the release of its yearly earnings projection May 6.
In a statement accompanying the projection, Chief Financial Officer Ross Landsbaum said, “Given our expectations of continued disruption from the ongoing realignment of our North American sales force and other challenges, we are revising our full-year business outlook.”
The result is that for the second quarter ended June 30, ReachLocal projected adjusted earnings before interest, taxes, depreciation and amortization would fall between zero and a loss of $5 million. Its first quarter Ebitda of $2.3 million beat some analysts’ predictions, but still represented a 73 percent drop from a year ago.
The news sent shares tumbling. Trading at $9.94 on May 6, the day of the announcement, by the next day’s closing bell, the price had fallen to $7.08. The slide continued, with shares closing at $6.75 on May 8, less than half its 52-week high of $15.74. The company was the biggest loser last week on the LABJ Stock Index. (See page 82.)
The bleak numbers mean ReachLocal’s new chief executive, Sharon Rowlands, has a big task to turn shareholder confidence around as the company tries to reorganize its sales department and increase productivity.
Company officials did not return a request for comment.
JP Morgan analyst Douglas Anmuth downgraded ReachLocal stock to “neutral” in his May 7 report from his previous “hold” position, though the New York analyst was “encouraged by new CEO Sharon Rowlands’ focus and strategy on solid execution across these various challenging initiatives.”
George Sutton, a senior research analyst at Craig-Hallum Capital Group in Minneapolis, was less forgiving in his report, urging shareholders to sell.
“While we find (Rowlands) a huge breath of fresh air and a very straight shooter,” Sutton wrote in a report issued a day after the projections were released, “this is a business that will take some time to refind itself and we sense a dearth of investors willing to wait out the potential long-term benefits.”
