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 Tremor Video (NYSE:TRMR) plunged a harrowing 49% Friday after the online video advertising specialist reported disappointing third-quarter results.
So what: Quarterly revenue rose 17% year over year to $35.3 million, which translated to a net loss of $0.05 per share. Analysts were looking for a much smaller net loss of just $0.02 per share on sales of $36.26 million.
Worse yet, Tremor Video also issued weak fourth-quarter revenue guidance in the range of $29.5 million and $30.5 million, also significantly below analysts' projections for Q4 sales of $38.56 million.
Now what: Perhaps unsurprisingly, Tremor Video's poor performance and forward outlook sparked no less than three downgrades on the day, driving shares as much as 54% lower at one point. Call me crazy, but that does seem a bit of an overreaction for a company whose cash now represents more than 40% of its entire market capitalization.
To be sure, Tremor will need to prove it can eventually achieve sustained profitability over the long term. While I wouldn't personally buy shares until that happens, its current results are hardly indicative of a failing company as it stands today. Don't be surprised, then, if the stock sees a near-term bounce once the market realizes its punishment doesn't fit the crime.
Fool contributor Steve Symington has no position in any stocks mentioned, and neither does The Motley Fool. 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 Motley Fool has a disclosure policy.