Pivot Technology Solutions Inc. (TSE: PTG) Hits Sell Zone On Slowing Revenue Growth Concerns


Pivot Technology Solutions Inc. (TSE: PTG) has rattled investors and the markets on providing disappointing preliminary earnings results for Q4 2018. The stock has taken a significant hit amidst growing concerns of a slowdown in revenue generation.

The stock remains under immense pressure, investor’s sentiments having hit all-time lows.  While the stock did a rally on the formation of double bottom, things have once again turned south amidst soaring short selling pressure.

Pivot Technology finds itself in a precarious position, having plunged below the $1 a share handle. All indication is that the stock will continue edging lower in continuation of the long-term downtrend.  The only way the stock will bounce back from current lows is on the IT solutions provider serving groundbreaking catalysts that affirm long-term prospects.

Why is Pivot Technology Tanking?

Revenue Growth Concerns

Pivot Technology finds itself on the receiving end on announcing it expects revenues of between $310 million and $315 million for the fourth quarter. In contrast, the company reported revenues of $399 million for the same quarter in 2017 and $321 million in the third quarter of 2018. The announcement has not gone well with the markets consequently fuelling a sell-off of the stock.

In defense of the expected disappointing reports, Pivot Technology says a decline in revenues will be because of lower sales to major customers. The company expected higher revenues from major customers, something that did not materialize in the quarter.

Improving Margins

Amidst the slowdown in revenue growth, the company expects gross profit margin to improve to 13% compared to 12.2% in Q4 of 2017. An improvement in profit margin would be, as a result, of improved sales mix to non-major customers. The company also did benefit from cost reductions in the quarter.

Despite lower revenue, Pivot Technology remains confident of reporting a positive adjusted EBITDA.

“During the quarter, we removed $5 million of annualized costs from the business, which supported higher margins despite lower product sales,” said Kevin Shank, President, and Chief Executive Officer. “Our cost reduction work will continue through the first half of 2019, and we expect it to result in a more flexible and efficient cost structure.”

In response to revenue growth concerns, Pivot technologies have embarked on a five-part strategy aimed at reinvigorating long-term prospects. The company intends to build its core business of selling IT solutions as it also moves to enhance its service portfolio and capabilities. The IT solutions provider also intends to embark on an aggressive commercialization drive with the aim of expanding its addressable opportunities. Plans are also underway to improve cost management.

Bottom Line

While a slowdown in revenue growth is a point of concern, Pivot technology has shown it is working round the clock to revitalize revenue growth. The company is embarking on an aggressive commercialization drive in an effort of identifying new opportunities. Cost management is another development that affirms the company’s commitment to strengthening profit margin.

After the recent slide, the stock needs to serve new groundbreaking catalysts to avert a further slide in the market and bounce back from current lows.


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