Entering text into the input field will update the search result below

Yext: Value Stock For A Bear Market

Mar. 11, 2020 11:25 AM ETYext, Inc. (YEXT)3 Comments
Gary Alexander profile picture
Gary Alexander


  • Shares of Yext have fallen roughly 20% since the start of the market pullback, despite having little exposure to the economic fallout from the coronavirus.
  • Yext's most recent quarterly results showed an acceleration in billings, suggesting a strong FY21 ahead.
  • The company's Yext Answers product, which adds search bar functionality to clients' websites, is a huge driver of revenue upside.
  • Yext is a deep bargain at ~3.5x forward revenues.

To the extent that the current market pullback was caused by fears of the coronavirus, it was also prompted by overheating in most stocks across the market. Valuation multiples had run extremely hot, especially in the tech sector - so at the first sight that not everything was perfect, stocks fell quite hard.

Unfortunately, the broad-based pullback has also hit stocks that are neither deeply impacted by the coronavirus nor too expensive to begin with, especially Yext (NYSE:YEXT). The New York-based software company, whose technology helps companies manage their location data across the internet, has fallen about 20% since the start of the pullback, despite a strong showing in the fourth quarter of fiscal 2020 that points to another strong year ahead.

ChartData by YCharts

And in market turmoil, my investment strategy remains largely unchanged: buy high-quality growth businesses at an even more reasonable price. And despite the recent roller coaster, Yext remains a core mainstay in my portfolio. The bullish thesis for Yext, in my view, rests on the following factors:

  • Growth driven by a unique product. Yext is still rightly considered a high-growth stock, with revenue growth clocking in at just under 30% y/y. Unlike many of its peers in the SaaS sector, very few companies are focused on what Yext is doing, giving it thought leadership in its space and very little competition.
  • High recurring revenue, high margin business. Yext derives a stable base of recurring revenues from its customers, which it generally charges by location (so as franchises like Wendy's (WEN) expands its footprint and uses Yext to manage those locations, Yext's billings grows). Yext also generates strong ~75% gross margins, giving it strong opportunities for operating leverage.
  • New products driving wider TAM. Yext is ramping up Yext Answers, which management believes extends Yext's TAM
ChartData by YCharts

This article was written by

Gary Alexander profile picture
With combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on Seeking Alpha since 2017. He has been quoted in many web publications and his articles are syndicated to company pages in popular trading apps like Robinhood.

Analyst’s Disclosure: I am/we are long YEXT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.