Matterport (NASDAQ:MTTR) announced its earnings for the fourth quarter (Q4) on Feb. 16, but the market was not very pleased. MTTR stock fell in anticipation of lower than expected revenue and the company’s losses.
As a result, Matterport stock has fallen from a peak of $33.05 on Nov. 29 down to $7.12 as of Mar. 10. That represents a precipitous drop of 78.5% from the peak. This reflects a major re-rating in the stock.
Matterport is a leading spatial data company. Its 3-D spatial data software provides solutions in the real estate industry and related industries, such as travel and hospitality, and engineering and construction.
Where Things Stand With Matterport
Matterport reported revenue of $27.1 million for Q4, which actually was $1.94 million higher than analysts’ estimates, according to Seeking Alpha.
However, the company’s earnings were lower than expected. It produced a net income loss of $160.99 million, much worse than the $3.1 million loss last year.
But even more disturbing was the fact that its ongoing “run-rate” revenue was just $108 million. This can be seen on page 4 of its slide deck presentation. This is lower than the $111 million in run-rate revenue that Matterport said it would have in the Q3 2021 presentation.
In other words, sales growth is slowing. For example, it said that annual recurring revenue (ARR) was $66.1 million in Q4. But this is only slightly over the $63 million in ARR that it reported in Q3.
This is important since MTTR stock has a market capitalization of $1.83 billion even after its most recent decline. Given analysts’ forecast of 2022 sales of $134 million puts it on a Price-to-sales (P/S) multiple of over 13 times.
That is still a very high multiple. It could leave MTTR stock vulnerable to another major hit if revenue does not come in higher than expected. That could also be a major reason why the stock has been weak so far this year.
What to do With MTTR Stock
If sales in the real estate industry slow down, that will affect Matterport a good deal. So far, the company expects to see sales in 2022 in the range of $125 to $135 million. If it were to fall short of that, the company could see a further drop in MTTR stock.
There are six Wall Street analysts surveyed by TipRanks.com who have written on the stock in the last 3 months. Their average price target is $15.33, or over 115% higher than today’s price.
Similarly, Seeking Alpha has a survey of 6 analysts and their price target on average is the same as at TipRanks. In other words, analysts seem to be very positive about the stock.
However, Seeking Alpha has a chart that shows that the average price target has declined dramatically in the past two months. This was likely the result of analysts lowering their assessment of the company’s profitability.
I suspect that most investors will want to wait and see when the company will become profitable or close to profitable before investing. That is because, at 13 times sales, there is no room for any misstep in the company’s growth or revenue prospects.
Moreover, Matterport is still not cash flow positive. In 2021, its cash flow from operations was negative $38.8 million. And after deducting $810,000 in capex and $7.2 million in capitalized software costs, its burn rate was $46 million for the year. However, Matterport still has $139 million in cash on its balance sheet, so it can afford to burn cash for another 2 years or so before needing to raise more.
Nevertheless, investors should be aware that this stock will likely be very volatile. That will be the case, at least, until Matterport reaches profitability or is cash flow positive and not burning through cash.
On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.