CPI Card Group Shares Plunge Following Disappointing Earnings Report

CPI Card Group experienced a dramatic selloff on Tuesday, with its stock price collapsing by more than 17% after the company released disappointing quarterly results and revised its full-year guidance downward. Trading at $14.54, the sharp decline reflects significant investor concern over contracting profit margins and an uncertain earnings outlook.

The company reported an 11% increase in revenue, reaching $138 million, but this positive performance was severely undermined by a substantial earnings miss. CPI Card Group's adjusted earnings per share came in at just $0.19, dramatically below the $0.63 consensus estimate among market analysts—representing a nearly 70% negative surprise.

Key profitability metrics showed significant deterioration. The EBITDA margin contracted from 20.1% to 17.0%, while the gross profit margin declined from 35.8% to 29.7%. Management attributed these margin pressures to several factors:
- An unfavorable sales mix across product categories
- Competitive pricing pressure leading to lower selling prices
- Increased production expenses
- Ongoing tariff-related costs

Should investors sell immediately? Or is it worth buying CPI Card?

Guidance Revision Intensifies Investor Concerns

Responding to persistent margin challenges, company leadership significantly lowered its full-year financial projections. The revenue growth forecast was adjusted from "low double-digit to mid-teens" to "low double-digit to low-teens." More notably, the adjusted EBITDA outlook saw a substantial revision—instead of the previously anticipated mid to high single-digit growth, management now expects flat to low single-digit growth.

Strategic Initiatives Face Headwinds

Despite current operational challenges, CPI Card Group continues to pursue its long-term growth strategy. The May acquisition of Arroweye Solutions contributed to the quarter's revenue growth, while the investment in Australian payment technology firm Karta aims to enhance fraud prevention capabilities in the U.S. market. The company's new Indiana production facility is now fully operational and expected to deliver efficiency improvements beginning in 2026.

However, these strategic investments are struggling to offset immediate operational pressures. The company faces projected tariff expenses of $4-5 million for 2025, while its prepaid card division reported a 7% revenue decline. Technical chart analysis indicates significant weakness following the breach of key support levels, suggesting continued bearish sentiment among traders.