Ellie Mae Plunges as the Refinancing Cycle Ends

Ellie Mae (NYSE: ELLI) was one of the big winners of the new housing boom of the 2010s. Its software enabled the financial industry to handle their mortgage loans more easily, and until recently, strong mortgage volume encouraged its clients to expand their business and thereby boost demand for Ellie Mae's software platforms. Yet last quarter, Ellie Mae saw some troubling trends in the industry that suggested that the interest-rate cycle might make the mortgage business a less desirable place to be.

Coming into Thursday's second-quarter financial report, Ellie Mae investors wanted reassurance that the mortgage-software specialist could generate strong revenue growth and solid bottom-line performance even in the face of changing conditions in the mortgage market. Instead, Ellie Mae reported weaker sales growth and a steeper decline in adjusted net income per share than expected, and ugly guidance revisions for the rest of 2017 sent the stock into a tailspin. Let's look more closely at what Ellie Mae said and why it caused investors to panic.

Image source: Ellie Mae.

Source: Fool.com