CS Disco Stock Plunges 13% on Disappointing Q1 Results and Lowered Forecasts

CS Disco's shares fell 13% after reporting a Q1 2024 loss of $0.17 per share, missing estimates, and revenue growth of 7.6% year-over-year. The company's new CEO, Eric Friedrichsen, was introduced during the earnings call, succeeding Scott Hill.

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Bijay Laxmi
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CS Disco Stock Plunges 13% on Disappointing Q1 Results and Lowered Forecasts

CS Disco Stock Plunges 13% on Disappointing Q1 Results and Lowered Forecasts

CS Disco Inc. (NYSE: LAW) shares tumbled 13% to $6.80 in after-hours trading on Wednesday following the release of the company's first-quarter 2024 financial results. The cloud-based legal technology provider reported a loss of $0.17 per share, missing the consensus estimate of $0.12 per share. Revenue for the quarter came in at $35.60 million, slightly above analysts' expectations of $35.52 million but representing a modest 7.6% year-over-year growth.

Why this matters: The disappointing Q1 results and lowered forecasts for CS Disco may have a ripple effect on the legal technology industry, influencing investor confidence and potentially impacting the adoption of cloud-based legal solutions. This development could also have implications for the company's competitors and the broader market, as investors reassess their expectations for growth and profitability.

The disappointing results prompted analysts to lower their forecasts for CS Disco. They now project revenue of $147.2 million and a loss of $0.72 per share for the full year 2024. The consensus price target for the stock has also been cut by 7.5% to $8.17. Several research firms weighed in on the stock, with Needham & Company LLC decreasing their price target from $15.00 to $11.00 and JPMorgan Chase & Co. initiating coverage with a "neutral" rating and a $9.00 target price.

CS Disco, founded in 2012 and based in Austin, Texas, provides cloud-native and AI-powered legal solutions for enterprises, law firms, legal services providers, and governments. The company's offerings include legal hold, legal request, ediscovery, legal document review, and case management tools. Despite the recent setback, CS Disco has seen its stock rise by 10.4% since the beginning of the year, from $7.59 to $6.80.

During the company's Q1 2024 earnings call, CS Disco introduced Eric Friedrichsen as its new Chief Executive Officer, succeeding Scott Hill, who will transition to the role of Incoming Chair of the Board of Directors. Friedrichsen, previously the CEO of Emburse, brings a track record of doubling revenue to over $250 million while improving gross margins and expanding the employee population. "I just want to start by taking a moment to thank you, Scott. Your leadership over the past eight months has been both stabilizing and inspirational. I am very appreciative," said Friedrichsen.

CS Disco's short interest ratio currently stands at 3.0 days, with 3.9% of the company's stock sold short. The company is scheduled to release its next quarterly earnings report on Wednesday, August 14th, 2024. As of May 12, 2024, CS Disco has a market capitalization of $412.47 million, a price-to-earnings ratio of -12.59, and a beta of 2.23.

Key Takeaways

  • CS Disco's Q1 2024 earnings miss estimates with a $0.17 loss per share.
  • Revenue reaches $35.60 million, a 7.6% year-over-year growth.
  • Analysts lower forecasts, projecting $147.2 million revenue and $0.72 loss per share for 2024.
  • Consensus price target cut by 7.5% to $8.17, with some firms initiating "neutral" ratings.
  • Eric Friedrichsen takes over as CEO, succeeding Scott Hill, who becomes Incoming Chair of the Board.