Olo shares opened 35% down on Friday: buy the dip?

Shares of Olo Inc (NYSE: OLO) opened about 30% down on Friday after the restaurant technology company disappointed both on Q2 results and future guidance.

Stifel downgrades Olo shares to ‘hold’

Sentiment worsened further after a Stifel analyst said the sell-off was not an opportunity to build a position in Olo shares.

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This morning, Brad Reback downgraded the stock to “hold” and lowered his price target to $9.0 – roughly in line with where it’s trading at the time of writing. He wrote:

Olo posted disappointing F2Q22 results as 2H guidance was ~15M below sell-side expectations driven by elongated sales cycles and slower than anticipated deployment schedules at existing customers.

Olo Inc Q2 financial highlights

• Lost $11.7 million versus the year-ago $2.4 million
• Per-share loss climbed from 2 cents to 7 cents
• Adjusted for one-time items, EPS stood at 1 cent
• Revenue went up 27% year-on-year to $45.6 million
• Consensus was “breakeven” on $45.8 million in revenue

The NYSE-listed firm ended the quarter with $464.7 million in cash, equivalents, and investments, as per the earnings press release. Reback added:

Additionally, management disclosed Subway (~15K locations) has begun the process of replacing Olo’s Rails product with a homegrown solution (2.5K locations moved in 2Q with the remaining expected in 1Q23).

Olo lowers guidance for the full year

For the full financial year, Olo now forecasts its revenue to fall between $183 million and $184 million. Previously, it had guided for $195 million to $197 million. The Stifel analyst concluded:

Overall, while the restaurant industry will continue to move forward with digitisation efforts, the pace of these transitions is unlikely to look anything like what the segment has experienced over the COVID years.

Olo shares are now trading at an all-time low.