August 1, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of patent risk management firm RPX Corp. (Nasdaq: RPXC ) were seeing red today, down 22% after the company reported quarterly earnings last night.
So what: The service provider actually beat EPS estimates by $0.07 per share with a $0.29 adjusted profit, but revenue projections for next quarter came in below the Street's view. Analysts had been expecting $49 million in sales in Q3, while RPX guided in the range of $46.7 million-$47.1 million, which represents a sharp sequential decline from the $55.2 million it posted in the second quarter. It also dialed back full-year guidance slightly to the lower end of its previously stated ranged $193 million-$203 million range. Finally, management also acknowledged that customer acquisition has been slower than expected as the company added just four clients in the quarter to bring the grand total to 124.
Now what: For a young, high-margin company operating in a growing industry, shares of RPX look surprisingly cheap at a P/E of just 17, a steal compared to where they were a year ago. Even with the lower guidance, the company is still eyeing non-GAAP net income of $42 million-$48 million for the year, giving it a P/E of around 11 based on expected 2012 earnings. Wall Street still sees solid, top-line growth for the patent specialist, projecting a 22% increase in 2013. For investors who believe in the business model, now looks like a great time to get in.
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