Why Shanda Games' Shares Jumped

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 Shanda Games Limited (NASDAQ: GAME  ) jumped 15% today after the company reported first-quarter earnings.

So what: Revenue dropped 22%, to $173 million, but that was in-line with what analysts were expecting. A 10% sequential improvement in net income to $43.9 million, or $0.16 per share, was better than expected and, after missing expectations in three of the last four quarters, investors welcomed the good news. 

Now what: Trends are down on both the top and bottom line, but management thinks it's about to see improvement. The mobile game business now accounts for about 10% of revenue, and new products will be launching this year in Asia. The problem is that revenue is falling, and I'm not going to put the cart before the horse here. I'd like to see financial results improve before jumping in, so I think the best move is to sell the pop today.

Interested in more info on Shanda Games? Add it to your watchlist by clicking here.


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