Why Did Vimeo’s Stock Drop 27% last week?

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The video software company’s earnings were in line with analyst estimates but its fourth quarter and 2022 projection was disappointing, causing the stock to plunge. The stock went down a further 26.7% the following day.

Vimeo revealed its earnings for the three months ending in September after the market closed on November 3rd. The company’s revenue increased by 33% year over year to $100 million, with diluted profits per share (EPS) of $0.07. Both statistics were in line with analyst estimates, therefore the findings are unlikely to be the reason for the stock’s current decline.

The cause for the share dip might be due to management’s comments on Vimeo’s forward guidance during the conference call. Vimeo expects revenue to increase 25% year over year in Q4, while revenue growth in 2022 is projected to fall short of 30%. Analysts had predicted a 28% increase in Q4 and 32% growth in 2022, thus management’s projection fell very short of their expectations. This is why the stock of Vimeo was down more than 25% at the time. Why are experts so fixated on the 30% figure? Vimeo stated during its investor day in March, prior to its split from IAC/InterActiveCorp, that revenue will rise at a 30% pace for the next five years. If its projection for 2022 comes true, it will already fall short of those expectations.

Management stated that sales growth in 2022 will be lower due to the difficult comparative statistics it will face in 2021 but that it intends to return to its 30% plus revenue growth objective in the long run. With a market worth of $4.2 billion and a stock price that has dropped more than 50% since its split from IAC, now might be a good moment to buy shares at a discount if you feel Vimeo can achieve its long term goals.

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