Why Constant Contact, Inc. Shares Crumbled

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 Constant Contact, (NASDAQ: CTCT  ) fell 13% Friday despite fourth-quarter results and forward guidance that came out ahead of expectations. 

So what: Quarterly revenue rose 13% to $74.9 million, which translated to 76% growth in non-GAAP net income, to $0.30 per share. By contrast, analysts were only looking for earnings of $0.27 per share on sales of $74.88 million.

In addition, Constant Contact issued guidance for 2014 sales to grow "more than 13%" -- which means sales of at least $322.5 million -- with adjusted earnings of $0.96 per share. Analysts were only modeling 2014 earnings of $0.94 per share on revenue of $321.43 million.

So what gives? With the the stock going into the report priced at a lofty 90 times last year's earnings, it looks like the market was hoping for an even bigger beat.

Now what: But it's also worth keeping in mind that shares look much more reasonably priced (though still aren't particularly cheap) at roughly 23 times next year's estimated earnings. As it stands, I'm personally not intrigued enough to pick up shares here given Constant Contact's sluggish top-line growth -- after all, it can't keep growing earnings at this rapid clip forever without at some point accelerating revenue growth. At the very least, investors might be wise to add Constant Contact to their watchlists to keep tabs on its progress.

Consider the six amazing growth stocks in this free report
If Constant Contact doesn't quite whet your appetite for growth, you're in luck!

They said it couldn't be done. But David Gardner has proved them wrong, time, and time, and time again, with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently, one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2819879, ~/Articles/ArticleHandler.aspx, 9/30/2014 8:25:05 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement