What happened
Pegasystems (PEGA 0.36%) investors lost ground to a falling market this week as shares declined 13% through Thursday trading compared to a 3% slump in the S&P 500, according to data provided by S&P Global Market Intelligence. The drop added to big short-term losses for owners of the software-as-a-service specialist, whose shares have dropped 71% so far in 2022.
It was sparked by generally weaker earnings expectations for tech stocks.
So what
The tech-heavy Nasdaq index, which is Pegasystems' trading home, dove 6% through Thursday. Pega's decline doesn't seem as bad in that context, especially considering that most of its peers also fell hard.
NASDAQ: PEGA
Key Data Points
There are some specific worries that have investors feeling cautious about the stock today. Pegasystems said in late July that slowing economic growth has started to "put pressure on our clients," for example. Global IT software demand trends appear to have worsened since then, and so Pegasystems might struggle to grow. Most Wall Street pros are targeting sales gains of just 7% in fiscal 2022. The stock is also being pressured by Pega's swing to net losses in the most recent quarter.
Now what
CEO Alan Trefler and his team are as bullish as ever about their ability to steadily grow sales while increasing profitability over time. It is also possible that its low-code platform will find rising demand as IT budgets become stressed. However, the stock is likely to see more tough weeks like this when the broader investing mood turns sour as it did over the last few days.
The long-term prospects for Pega's business haven't changed. But investors today are avoiding stocks that aren't growing quickly or posting strong profit margins. And these pressures might last a bit longer, especially if a recession develops over the next few quarters.
