Yext Stock Dips Amid Skepticism about AI Potential

Yext stock took a hit on Thursday, reflecting a growing skepticism among investors regarding the prospects of artificial intelligence (AI) benefiting various industries.

Decline in Stock Price

Yext (ticker: YEXT) experienced a 13% decline in premarket trading, with shares valued at $7.94, following the release of its latest earnings report. Although the stock had seen a significant 39% increase since the beginning of the year, it has fallen from its peak of over $13 earlier in the year.

Disappointing Growth Rates

Despite meeting or slightly surpassing analysts' expectations for its results and revising its guidance upwards, Yext's second-quarter revenue growth of 2% compared to the previous year failed to impress, given the hype surrounding AI technology. This lackluster performance suggests that investors are becoming more discerning when it comes to AI-related stocks.

Struggles to Regain Momentum

Yext specializes in leveraging AI technology to help businesses enhance their online search performance. However, the company is facing challenges in returning to its historical growth rates. Consequently, Yext isn't the only AI-driven stock facing punishment in the market; C3.ai (AI) also experienced a 10% drop in premarket trading after withdrawing its profit forecast.

Analyst's Perspective

Tom White, an analyst at D.A. Davidson, raised his target price for Yext stock to $11.50 from $10. However, he maintained a Neutral rating, explaining that Yext is still in the early stages of its turnaround and that enterprise spending remains uncertain due to the fluid macroeconomic landscape.

Second-Quarter Results

In the second quarter, Yext reported adjusted earnings of 7 cents per share, which matched analysts' expectations and marked an improvement from the 3-cent loss during the same period last year. Moreover, the company's revenue increased to $102.6 million compared to $100.9 million a year ago, slightly surpassing analysts' forecasts of $102 million.

Third-Quarter and Full-Year Outlook

Yext anticipates adjusted earnings of 6 to 7 cents per share for the third quarter, with revenue ranging from $101.5 million to $102.5 million. For the whole year, the company expects adjusted earnings between 29 and 30 cents per share, with total revenue reaching $405 million to $407 million.