The shares of cloud software company Blackbaud (NASDAQ: BLKB) were unable to break above the yearly high price of $71.76, even after reporting a 15.3% year-over-year increase in the fiscal 2016 second-quarter revenue. While externally it looks as if the weakness in the share price was an outcome of the lower than anticipated earnings and revenue, in reality, as described below, there are a few crucial factors that have created a bearish view on the stock.
During Q2 2016, the company reported GAAP revenue of $180.19 million, compared to $156.26 million in Q2 2015. Blackbaud missed the Zacks revenue estimate of $182.05 million. The fiscal 2016 second-quarter non-GAAP revenue grew to $182.04 million, from $166.46 million in the similar period last year.
The Charleston, South Carolina-based company reported an increase in the second-quarter GAAP net income to $7.81 million or $0.17 per share, from $7.04 million or $0.15 per share in the corresponding quarter last year.
For the quarter ended June 2016, excluding charges, the non-GAAP net income jumped to $21.76 million or $0.46 per share, from $19.23 million or $0.41 per share in the quarter ended June 2015. The company’s quarterly earnings per share were lower than the analysts’ estimate of $0.50 per share.
For fiscal 2016, Blackbaud anticipates non-GAAP revenue to be between $725 million and $740 million. Blackbaud also expects fiscal 2016 non-GAAP earnings in the range of $1.90 to $1.98 per share. For the full year 2016, the cash flow from operations is forecasted to be between $135 million and $145 million.
The company also declared a dividend of $0.12 per share, payable on September 15, 2016. In spite of the increase in revenue and earnings, the share price is not going up because of the decline in the second-quarter GAAP operating income to $14.20 million, from $14.46 million in the previous year’s second quarter. In short, the operating margin has fallen to 7.9% in the quarter ended June 2016, from 9.3% a year earlier. The operating margin reflects the efficiency of the company. In this case, a decline in the efficiency discourages investment in the stock. Thus, fundamentally, the stock price will remain range-bound with a negative bias in the third-quarter.
Till now the stock has managed to hold above the 50-day moving average of 67.08. The resistance for this stock exists at 70, while the major support exists at 62. The declining stochastic indicator reflects a bearish scenario. Therefore, it is only a matter of time before we see the stock break below the 50-day moving average.
It is wise to purchase a one-touch put option contract to gain from the probable fall in the share price. A strike price of $62 or higher would be of great assistance to the trader in realizing profit from the trade. Likewise, an expiry period in the second week of September is also advisable.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
