Technology Sector Ideas

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>>> Why Aspen Technology Stock Crashed Today


Motley Fool

By Anders Bylund

Apr 27, 2023


https://www.fool.com/investing/2023/04/27/why-aspen-technology-stock-crashed-today/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


KEY POINTS

AspenTech fell short of Wall Street’s estimates across the board in the just-reported third quarter.

Customers in the bulk chemicals sector aren’t spending much on software licenses these days, which led to Aspen’s soft top and bottom lines.

CEO Antonio Pietri won’t expect much from that industry for the remainder of calendar year 2023.


What happened

Shares of Aspen Technology (AZPN) plunged as much as 30% on Thursday morning, as investors digested a disappointing third-quarter earnings report. The maker of enterprise asset-management tools and services recovered slightly from that dip, settling down roughly 24% below Wednesday's closing price for most of the day.

So what

Aspen's adjusted earnings fell 23% year over year to $1.06 per diluted share. The analyst consensus had called for earnings closer to $1.66 per share. The company delivered 22% growth on the top line as revenue came in at $230 million, but even here, your average analyst wanted more. Consensus estimates pointed to sales near $286 million.

Now what

Disappointment might not seem like the right reaction to a 22% revenue jump, especially in this challenging economy, but everyone wanted more. As it turns out, AspenTech hoped that the order volume from clients in bulk chemical production would bounce back after two consecutive weak quarters. Instead, the problem intensified and Aspen ended up missing its own and Wall Street's expectations as a result.

"We will remain cautious about the software spending outlook from this industry for the remainder of the calendar year," CEO Antonio Pietri said on the earnings call.

That being said, today's sharp price drop feels more like a correction than a punishment. At this point, AspenTech's stock is up 15% in 52 weeks -- in line with many other enterprise software specialists and far ahead of the broader market.

Aspen is building generative ChatGPT-like artificial intelligence (AI) smarts into its entire service portfolio.

"It is early days, but we have identified many use cases where this capability can help improve the workflow and time-to-value for our customers," Pietri said. "We will provide more details on this exciting area in future calls."

In other words, AspenTech is latching on to the generative AI opportunity with an eye toward significant business in the long haul. So if you were looking for a proven winner leaning into the AI space, Aspen's sudden price drop lets you start a position at a more reasonable valuation.

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