Why AppFolio Stock Is Plummeting Today

Shares of AppFolio (NASDAQ: APPF) are tumbling on Friday. The company's stock fell 15.7% as of noon today, but was down as much as 16.9% earlier in the day. The decline comes as the S&P 500 and Nasdaq Composite were mostly flat.

The software-as-a-service (SaaS) company reported first-quarter results that narrowly missed expectations despite 16% year-over-year sales growth.

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Revenue is growing, but not quite as much as expected

AppFolio, which serves the real estate industry, reported first-quarter earnings per share (EPS) of $1.21, falling short of Wall Street's expectations of $1.23. Revenue came in at $218 million, slightly lower than the expected $220.94 million.

The company is also seeing its margins pressured, with its operating margin decreasing year over year from 18.2% to 15.5%. Despite the 16% growth in revenue, the decreasing margins and the slight misses on both the top and bottom lines were enough to lead many investors to sell.

It's a somewhat pricey stock

Still, there are bright spots in the report. It continues to see demand for its products as sales are growing in its core and peripheral businesses. The company expects 17% growth in revenue for 2025 as well as modest growth in its adjusted operating margin.

Its CEO was optimistic, saying "AppFolio's first-quarter results underscore that our ongoing commitment to delivering industry-leading innovation and exceptional service is driving new customer adoption of our products and services."

The company's stock trades at a premium, with a price-to-earnings ratio (P/E) of 36. While that's not unreasonable for a SaaS provider, it doesn't leave a lot of room for error. I'm not convinced it can continue to consistently deliver the growth it needs to.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AppFolio. The Motley Fool has a disclosure policy.