iSentia Share Price Drops 18% on Earnings Downgrade

iSentia Group Ltd [ASX:ISD] fell as much as 18% this morning, to $1.82 per share.

What happened this morning?

This morning, iSentia released a trading update, with the group announcing revenues and earnings would be lower than previous guidance.

iSentia now expects revenues and earnings to total $155.1 million and $41.5 million respectively. That’s 4.3% and 5.7% lower respectively than their original guidance. iSentia CEO John Croll said:

While it’s disappointing to have to provide this lower earnings update for FY17, looking forward, we have put in place a number of initiative to improve operating performance across the business. The challenging competitive environment we face in FY17 H1 has improved with Isentia winning back 50 clients net from our competitors in Australia in FY17 H2.

The group’s content marketing division will drag down total revenues. iSentia is expecting content marketing revenues to fall 30% year-on-year, to $14.2 million. Poor performance by King Content has forced iSentia to write down that asset, axing the marketing agency. This will lead to a $37.8 million impairment charge for the group.

What now for iSentia?

This could potentially be a time to consider entering the stock for long-term investors, with profits taking a dive, and the market pushing down the stock price based on lower-than-expected results.

iSentia trades for around 11-times earnings and has a 4% dividend yield.


Härje Ronngard,

Junior Analyst, Money Morning

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