Why Asure (ASUR) Stock Is Trading Lower Today
What Happened:
Shares of online payroll and human resource software provider Asure (NASDAQ:ASUR) fell 20.5% in the pre-market session after the company reported fourth-quarter results with revenue and EPS missing Wall Street's estimates. Sales growth declined in absolute terms. The weak topline growth also impacted profitability as gross margin declined significantly during the quarter. Looking ahead, its revenue outlook for the next quarter was soft, suggesting slower demand to start the year.
On the other hand, Asure's full-year 2024 sales and EBITDA outlook exceeded analysts' expectations. The company noted that the forward sales guidance excludes contributions from Employee Retention Tax Credit (ERTC – a refundable tax credit for some businesses impacted by the recent pandemic) but assumes potential benefits from acquisitions. Overall, the results could have been better.
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What is the market telling us:
Asure's shares are not very volatile than the market average and over the last year have had only 25 moves greater than 5%. Moves this big are very rare for Asure 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 6 months ago, when the stock dropped 10% on the news that the company announced it plans to offer and sell newly issued shares of its common stock in an underwritten public offering. Asure is expected to grant the underwriters a 30-day over-allotment option to purchase up to an additional 15% of shares of common stock, subject to market conditions.
While this development will result in proceeds to the company, the market usually reacts negatively. Firstly, the offering price is usually below the current share price, and this offering is no different. ASUR shares are being sold at $12, below the previous day's $13.85 closing price. As such, issuing shares in this manner is sometimes a signal that the company itself thinks its stock is too expensive or overvalued. The announcement also results in dilution to existing shareholders, as their share of the company will be smaller due to the addition of the new shares into the total base.
Asure is up 7.6% since the beginning of the year, but at $9.74 per share it is still trading 42.1% below its 52-week high of $16.83 from April 2023. Investors who bought $1,000 worth of Asure's shares 5 years ago would now be looking at an investment worth $1,502.
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