Shares of Nerdy (NRDY, Financial) took a hit today, experiencing a significant drop of 7.55%, bringing the stock price down to $1.47. This decline comes on the heels of the company's latest earnings report, which, despite beating Wall Street's expectations, revealed concerning declines in both revenue and gross margin.
The recent financial results for Nerdy (NRDY, Financial) highlighted a quarterly loss per share of $0.09, which was an improvement over analysts' forecasted $0.14 loss per share. Additionally, the company's revenue of $48 million surpassed its guidance range and Wall Street's estimate. Despite these positive aspects, investors were unimpressed by the 13% decrease in sales from the previous year, coupled with a drop in gross margin to 66.6% from 71.3%.
The decline in gross margin was attributed to a reduction in the average revenue per member within the consumer segment. Furthermore, the net loss widened to $15.7 million compared to $9.2 million a year ago, alongside an 8% fall in active members to 37,500.
Nerdy's outlook remains challenging. The company has issued guidance for the upcoming quarter, projecting sales between $45 million and $47 million, indicating a 14% year-over-year decline at the midpoint. The anticipated adjusted EBITDA loss is $7 million, a significant reversal from the small positive figure reported in the corresponding quarter of 2024.
Analyzing the stock, Nerdy (NRDY, Financial) presents a complex valuation. The company is assessed as a "Possible Value Trap" according to its GF Value assessment, suggesting investors should proceed with caution. With a market capitalization of $169.69 million and a price-to-book ratio of 3.87, the stock is described as speculative, lacking clear predictability and showing signs of financial distress with an Altman Z-Score in the distress zone.
Nevertheless, there are positives such as insider buying activity, which might indicate some internal optimism about the company's future prospects. However, potential investors should consider the severe warning signs related to financial strength and profitability, including declining revenue per share and a negative operating margin trend.
