One of the worst performers on the Australian share market on Monday has been the Limeade Inc (ASX: LME) share price.
In afternoon trade the employee experience software company's shares are down a massive 32% to $1.01.
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Why is the Limeade share price crashing lower?
Today's decline appears to be a delayed reaction to Limeade's underwhelming full year results release at the end of last week.
For the 12 months to 31 December, the company reported a 19.3% increase in revenue to US$56.6 million. This was driven by a 20.8% lift in recurring subscription revenue to $54.9 million.
While this was solid, its guidance for the year ahead has overshadowed its positive form in FY 2020.
FY 2021 outlook
Management expects its FY 2021 revenue to be in the range of US$50 million to US$53 million. This implies a 6.4% to 11.5% year on year decline.
Management explained that COVID-19 was the reason for the weak guidance.
It said: "COVID-19 slowed new customer growth in 2020 and therefore impacted revenue outlook when coupled with 2021 forecast churn… Growth in new 2021 customer acquisitions will continue to be seasonal, accelerating in H2 and contributing to revenue growth in 2022."
Customer numbers decline
One metric which appears to have worried investors and could be weighing on the Limeade share price today is its customer numbers.
Management notes that COVID-19 "slowed new customer growth in 2020." However, it did more than slow its growth. Hidden away in its report, the company reveals that its customer numbers actually fell 13.3% from 173 in FY 2019.
Furthermore, that was actually the second year in a row of declining customer numbers. In FY 2018, Limeade had 187 customers. And judging by its outlook, there's a risk that it could make it three years of declines in a row in FY 2021.
Shares coming out of escrow
Also weighing on the Limeade share price today could be a massive 164 million shares that have come out of voluntary escrow.
Today is the first day that owners of these shares have been able to trade them. And judging by the Limeade share price performance, it appears as though many wanted to offload some of them.
Is the Limeade share price selloff a buying opportunity?
Analysts at Macquarie see value in the Limeade share price at the current level.
This morning the broker retained its outperform rating but cut the price target on its shares to $1.73.
Based on the current Limeade share price, this price target implies potential upside of ~71% over the next 12 months.
