Atomos share price plunges 42% lower on ‘slower than expected sales’

A revised guidance has soured Atomos shares among investors today…

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Key points

  • The Atomos share price is down more than 40% on a shocking day for the video tech company
  • Atomos has revised its full-year revenue guidance following slower sales in the first four months of 2022 
  • Margins are expected to compress in the short term as the company attempts to deploy more cloud-enabled products

The Atomos Ltd (ASX: AMS) share price has imploded following the release of a company trading update.

Evidently, investors are abandoning tech shares in droves on Friday, demonstrated by the 3.8% fall across the sector. However, the video technology company is feeling the pain more than most today. At the time of writing, Atomos shares are down a staggering 41.67% to 35 cents. In early trade, they sank as low as 26 cents.

The cataclysmic reaction to the announcement has resulted in the company collecting a new all-time low share price.

Promotional misstep and margin compression

Many Atomos shareholders are choosing not to stick around any longer following the company’s latest trading update.

According to the release, the first four months of the 2022 calendar year have been disappointing compared to expectations. The slower sales volume was attributed to a change in marketing approach and lower promotional activity.

In turn, FY22 revenue forecasts have been revised to adjust for the quieter trading conditions. Now, shareholders should expect revenue to range between $80 million and $90 million for the full year. Meanwhile, earnings before interest, tax, depreciation, and amortisation (EBITDA) margin is forecast to be between 6% and 8%.

Unfortunately for the Atomos share price, the insights within the update contained further caution for future expectations. For example, the recent COVID-19 lockdowns in Shanghai might put a short-term dent in the company’s production schedule. However, this is included in the newly advised guidance.

Furthermore, margins are slated to suffer while Atomos ramps up promotions and discounting of its cloud-enabled products. This is a targeted approach to give take-up of the company’s cloud services a nudge forward.

What about the positives for the Atomos share price?

On a positive note, the company highlighted that recent new launches have got a good reception. Encouragingly, the Aussie company landed itself seven awards at the National Association of Broadcasters (NAB) trade show recently.

Commenting on the successful event, Atomos interim CEO Trevor Elbourne said:

The reception we have received to our recent product launches is a strong endorsement of the technology roadmap we have been executing for the last couple of years. Whilst we were confident that the approach we were taking would resonate with our customers and the industry, it is gratifying to have that validated so strongly at NAB. The response we’ve had at NAB this year from all quarters has been so positive that I would mark this the most successful NAB for Atomos that I can recall.

However, Elbourne also shared in the disappointment with the revised guidance. A feeling clearly resonating across the market today as the Atomos share price sinks lower.

The Atomos share price is now down 68% since the beginning of the year.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Atomos Ltd. The Motley Fool Australia has recommended Atomos Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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