Is there now a buying opportunity in this 20% stock-market sinker?

This share has fallen by almost a quarter in Friday trade. Is this a buying opportunity or a red flag? Royston Wild goes through the details.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Attraqt (LSE: ATQT) has found itself on the end of a pasting in Friday business following the release of troubling trading details.

The business — which provides visual merchandising and search services to online retailers — was more than 20% lower from the prior night’s close and, although off intra-day lows, remains 18% lower on the day.

Attraqt announced that the review launched following the appointment of Eric Dodd as finance director in September had caused it to cut down some of its sales forecasts.  

The AIM-quoted business advised that “due to inaccuracies in forecasting the timing of certain contracts and client ‘go-live’ dates,” revenues are expected to be around 10% lower for 2017 than it had  expected. It also warned that the lower revenue run rate endured at the end of 2017 will carry forward into next year.

On a brighter note, Attraqt did advise that it expected to report high-single-digit organic growth in 2017, and that it should be EBITDA-positive in the second half of the year and broadly break-even for the year as a whole.

Forecasts fall

Attraqt said that the delays to pipeline conversion were the result result of “a number of significant new contracts closing, but later than planned, and some other contract decisions being delayed,” although it advised that its sales pipeline “remains strong” and that it boasts an order book of £2m.

It added that it was confident the forecasting inaccuracies around the timing of contract wins has now been resolved, and that management is working on a plan to resolve delayed ‘go-live’ dates.

City brokers had been expecting it to finally bounce into the black after years of losses with earnings of 1p per share, but today’s announcement could put these hopes through the shredder.

And as a consequence, the tech titan’s high forward P/E ratio of 36 times is likely to bump even higher in the days ahead. I reckon Attraqt, despite the brilliant revenues opportunities created by an expanding online retail sector, remains a pretty-risky dip buy at current prices.

Retailer on the ropes

Topps Tiles (LSE: TPT) has also endured no shortage of turnover trouble in recent times and, with economic headwinds intensifying in the UK, I also reckon the risks outweigh potential rewards here too.

The Cheadle-based firm continues to slump in value, its share price collapsing 34% in less than six months, and the steady stream of disappointing trading releases suggests that further woe can be expected.

Topps announced just this month that like-for-like revenues dipped 2.9% during the 12 months to September as a result of a “challenging” trading environment and it suggested that further troubles could be around the corner, noting that it is taking a “prudent view on market conditions for the year ahead.”

The City is expecting earnings to fall 5% in fiscal 2019, carrying on from the predicted 15% slide last year. While this results in a very-cheap forward P/E rating of 9.9 times, the strong possibility of swingeing downgrades to earnings forecasts here too is encouraging me to stay well away.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

2 recession-resistant UK stocks I’d buy and hold for a decade!

Our writer details two UK stocks she believes could still continue to perform well in a recession and not feel…

Read more »

Back view of blue NIO EP9 electric vehicle
Investing Articles

Down 31% this year! Is now the moment to buy NIO stock?

NIO stock has moved sharply downwards in the past couple of months. Christopher Ruane likes the business potential -- but…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 dividend stocks I reckon could grow payouts for years to come!

This Fool is looking for dividend stocks and explains why these two picks could be primed to grow their payouts…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

Should I buy, sell, or hold my Rolls-Royce shares at £3.50?

This Fool considers what he should do with his Rolls-Royce shares following the FTSE 100 company's excellent full-year results last…

Read more »

Couple working from home while daughter watches video on smartphone with headphones on
Investing Articles

With a spare £280, here’s how I’d start buying shares this March

Our writer reflects on what he has learnt on the stock market to explain how he would start buying shares…

Read more »

Businesswoman calculating finances in an office
Investing Articles

Are these expensive FTSE 100 stocks actually brilliant bargains?

Paul Summers takes a closer look at two FTSE 100 stocks that could recover strongly in time, despite already carrying…

Read more »

Investing Articles

What might the recent Aviva share price performance tell me as an investor?

Christopher Ruane looks at how the Aviva share price has performed over the past 12 months and considers whether he…

Read more »

Investing Articles

Down by a quarter, is the BT share price a steal?

The BT share price has more than halved in the past five years. What is holding it down -- and…

Read more »