Why RealPage Shares Are Clawing Their Way Back

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 RealPage (NASDAQ: RP  ) have been rising since an early morning plunge that shaved more than 11% off their value, and now seem to have stabilized at a loss of about 4% from the previous trading day. Investors seem somewhat displeased that the company's financial results and forward guidance were all so average.

So what: RealPage's revenue rose 19% year over year in the first quarter to $89 million, a hair ahead of the $88.9 million Wall Street consensus (essentially meeting the target). Adjusted earnings of $0.13 per share also matched the consensus estimate of $0.13 per share. Looking forward, RealPage's second-quarter guidance of $93.5 million to $95 million on the top line and $0.13 to $0.14 hit the consensus on both sides -- Wall Street sought $94.4 million in revenue and $0.14 in EPS. RealPage also sees full-year revenue of between $384 million and $390 million (in line with the $385.5 consensus) and $0.57 to $0.60 in EPS (also in line with the $0.59 consensus).

Now what: If this were an archery contest, RealPage would take home the gold, but investors tend to prefer a company beat the Street rather than meet it halfway. As a result of doing what everyone expected, RealPage was downgraded to "hold" from "buy" by Credit Suisse, which issued a price target $1 higher than the stock's current level due to concerns of decelerating growth. Even on an adjusted basis, RealPage's forward P/E sits at 32 presently -- only justified if you expect big growth to continue into the future. RealPage is now trading down 9% for the year to date, so the markets may not expect such growth for much longer.

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Related Tickers

9/19/2014 4:00 PM
RP $15.41 Down -0.31 -1.97%
RealPage, Inc. CAPS Rating: *
CS $27.70 Down -0.06 -0.22%
Credit Suisse Grou… CAPS Rating: ***

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