Why ServiceSource Shares Got Crushed

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 customer management software specialist ServiceSource International (Nasdaq: SREV  ) plummeted 28% on Wednesday after its quarterly results and guidance came in below Wall Street expectations.

So what: ServiceSource's second-quarter results managed to squeak past estimates, but disappointing guidance for the current quarter reinforces concerns over a slowdown in global tech spending. In fact, the stock is hitting a 52-week low on the news and is down a whopping 46% over the past year alone.

Now what: Management said it expects third-quarter, adjusted EPS to come in between a loss of $0.02 and breakeven (versus the Wall Street consensus of $0.01), but also reiterated its full-year guidance. "The strength of our second quarter results and ongoing business momentum provide us with confidence in our full year guidance," CFO David Oppenheimer reassured investors. Given the stock's still lofty forward P/E, however, I'd wait for a much larger margin of safety before buying into that bullishness.

Interested in more info on ServiceSource? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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