Damstra Share Price Plummets 14% on Guidance Downgrade (ASX:DTC)

Damstra Holdings Ltd [ASX:DTC] share price have sunk this morning after an AGM presentation from the company revealed several weak spots.

ASX DTC - Damstra Share Price ChartSource: Tradingview.com

Investors may feel discouraged after learning that ‘the market appears to have lost confidence in the company.’

Further pessimism was inevitable after the software firm disclosed that it is sharing ‘the disappointment in share price performance with other investors.’

The final nail on the coffin: a reduction in Damstra’s forecasts for FY22.

Today, let’s take a closer look at the challenges Damstra are facing and how investors should respond in the months to come…

At time of writing, Damstra’s stock is exchanging hands at 44 cents per share.

Why are Damstra shares falling today?

DTC’s presentation this morning was a downer for several reasons, and management were quick to admit that 2020/21 had been a difficult year.

One key obstacle explored was a dispute over a major client contract.

Another issue pointed to a global mining client’s ‘reduction of service’ as the company ‘internalised their hardwire and site access requirements.’

This is bad news for an enterprise protection business that relies on client retention for secure revenue.

Damstra confessed that both problems were ‘extremely disappointing and adversely impacted near-term organic growth outlook.’

As a result, the company’s FY22 guidance has undergone an adjustment.

The initially forecast $35.9–38.9 million has now been updated to $30–34 million.

Likewise, the original EBITDA margin also saw a dramatic change. From 22.5–25%, it’s now down to 15–20%.

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Will Damstra shares rebound?

It wasn’t all doom and gloom.

Damstra reassured investors that even though the guidance has changed, management still expect FY22 revenue to grow by 10–24%.

Today, the company also announced a new CFO, Andrew Ford.

Will this change of leadership help turn a new leaf?

It remains to be seen.

In the meantime, investors may wish to steer clear…

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Kiryll Prakapenka,

For Money Morning

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Kiryll Prakapenka is a research analyst focusing on investigating the biggest trends in investments. Kiryll brings sound analytical skills to his work, courtesy of his Philosophy degree from the University of Melbourne. A student of legendary investors and their strategies, Kiryll likes to synthesise macroeconomic narratives with a keen understanding of the fundamentals behind companies..

Money Morning Australia