On a bullish day in the market, it’s easy to find winners to focus on. With most sectors up, this is a market most investors are cheering right now. However, investors in Avaya (NYSE:AVYA) aren’t in the happy camp today. That’s because shares of AVYA stock have sunk more than 50% at the time of writing.
This move comes after the company released its preliminary Q3 results yesterday. Accordingly, as many would expect, these numbers missed the mark.
Avaya announced that the company expects revenue to come in between $575 million and $580 million, well below previous guidance of $685 million to $700 million. This incredible 18% downgrade of revenue guidance heading into earnings is concerning. Especially considering that the company is expected to report its official earnings on Aug. 9.
Additionally, the company’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) numbers got slashed by an even more incredible degree. As of the most recently available data, the company expects to bring in adjusted EBITDA of only $50 million to $55 million. That’s down substantially from the previous $140 million to $150 million range.
As a result of these significant cuts to earnings guidance, Avaya has mixed things up in its back office. Yesterday, the company announced that Jim Chirico has been removed in his role of president and CEO, with Alan Masarek taking the helm.
What’s Going on With AVYA Stock?
For the most part, forward guidance from most companies is considered sacrosanct. When a company says it expects to achieve a certain level of revenue and profitability, investors rely on these numbers to value the company.
Now, this macro environment is unfavorable. Accordingly, a range of guidance warnings have gone out from companies much bigger than Avaya. However, the scale of these downgrades is what has many investors (rightfully) spooked.
It’s unclear exactly what drove these material downgrades in the company’s expected results. However, investors appear to be selling first and asking question later. Thus, this stock appears to be one that’s likely too volatile for most investors to touch. At least, until the company provides some clearer guidance.
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On the date of publication, Chris MacDonald did not have (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.
