Why Digital River Inc. Shares Popped Today

Is this meaningful? Or just another movement?

May 1, 2014 at 2:23PM

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 Digital River (NASDAQ:DRIV) are trading 8% higher in the afternoon after rocketing to an opening-bell gain of over 11% on Wednesday morning. Investors have cheered Digital River's strong first-quarter earnings and are reacting favorably to respectable (though not strong) guidance issued for the remainder of the fiscal year.

So what: Digital River's first-quarter revenue fell 12% year over year to $97.8 million, but this reduced figure nevertheless cleared Wall Street's low expectations for $93.6 million in revenue. The company's earnings of $0.20 per share stomped on analyst expectations of a more modest $0.10 in EPS.

Digital River now expects to generate between $84 million and $87 million in revenue, and anticipates recording a loss of anywhere from $0.07 to $0.03 per share, for the second quarter. Analysts had expected $83.6 million in revenue, but had hoped Digital River would reach breakeven on the bottom line for the second quarter. Digital River also issued full-year guidance, which anticipates revenue in the range of $377 million to $382 million with an EPS range of $0.41 to $0.51. Analysts had sought $371.2 million in full-year revenue and $0.42 in full-year EPS, so the annual projection came in ahead on both counts.

Now what: This isn't really as good a report as it may seem on the surface. Digital River recorded $394.7 million in revenue for its 2013 fiscal year, so even the high end of its full-year guidance would result in a 3% year-over-year decline on the top line. The company's earnings per share, which have dawdled in negative territory of late as the result of one-time charges, were last positive toward the end of 2012, as Digital River recorded $0.42 in trailing 12-month EPS during the third quarter of that year. There might be some opportunity here, but it's buried under a thick layer of bad history. You'll have to dig pretty deep to uncover a hidden gem, and you're still far more likely to wind up with a pile of dirt.

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Alex Planes has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

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Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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