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 ChannelAdvisor (ECOM) initially fell by more than 14% during Tuesday's intraday trading, then recovered to close down less than 2% after the company beat earnings estimates but also forecast weaker-than-expected forward earnings guidance and announced a proposed follow-on stock offering.
So what: Quarterly revenue rose 28% year over year to $16.6 million, which translated to an adjusted net loss of $0.18 per share, compared to an adjusted net loss of just $0.13 per share in the same year-ago period. For reference, analysts were looking for a significantly larger loss of $0.27 per share on lower revenue of $15.86 million.
However, though ChannelAdvisor also provided in-line guidance for fourth-quarter revenue between $19.6 million and $20 million, it also stated its non-GAAP net loss per share should come in from $0.31 per share to $0.27 per share, based on roughly 22 million shares outstanding. Analysts, by contrast, were expecting a Q4 adjusted loss of just $0.23 per share.
In addition, the company proposed a follow-on stock offering, in which it would not only sell around 1 million shares but existing stockholders would also sell around 4 million of their own shares.
Now what: To its credit, ChannelAdvisor did beat estimates by reporting a smaller-than-expected loss on higher revenue. However, I still can't bring myself to get excited about the stock until this company can prove it has what it takes to not only increase revenue but also to translate that revenue to the bottom line and avoid the need to further dilute existing shareholders. In the meantime, you'll find me on the sidelines.
