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Why the Mobile Embrace Limited share price is getting smashed today

Mobile payments and commerce company Mobile Embrace Ltd (ASX: MBE) joined the tech-wreck club today after its shares lost one third of their value after it issued a full year profit warning.

The stock has now lost around 75% of its value over just the last six months as its management team’s forecasts fail to meet up to expectations.

The group is now expecting EBITDA of $2.1 million on revenues of $27.1 million for the half year ending December 31 2016, which would means EBITDA has nearly collapsed in half compared to the prior corresponding period (pcp).

The group is now also “forecasting” full year EBITDA between $5 million to $6 million on estimated revenues of $52 million. Evidently this would mean a flat to weaker second half of the year and it’s no surprise the stock has been whacked given management’s troubles in meeting their forecasts.

The group is blaming the first half troubles and outlook for a soft second half as being in part due to its direct carrier billing (DCB) activities being delayed by “external factors” that “will extend the return on investment timeline for international market activities to move into profit”.

Management stating that the consequent reduction in the DCB marketing spend may lop $13 million off FY 2017’s previously estimated revenues, but on the upside the decision to reduce DCB investments will help preserve cash.

The company also reassured investors over the strength of its balance sheet by stating that it “forecasts” it will have $12 million cash at the bank as at June 30 2017.

Despite its promise on the surface, Mobile Embrace was never a company I was keen on and with the stock down 36% in trade today it appears management’s excuses are not going to wash with investors either.

Mobile Embrace now joins an unfortunate club of junior tech-wreck companies I wrote about yesterday in failing to meet management’s overly-ambitious profit forecasts.

In fact it seems the tech-wreck club is now getting full, as yesterday I wrote about Senetas Corporation Limited’s (ASX: SEN) profit downgrade, as it joined others in this growing club including, among others, 1-Page Limited (ASX: 1PG), GBST Holdings Limited (ASX: GBT), Aconex Ltd (ASX: ACX) and Urbanise. Com Ltd (ASX: UBN).

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares in Aconex. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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