Why Digital River Inc. Shares Popped Today

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.

Are you ready to profit from this $14.4 trillion revolution?
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer Amazon.com in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.


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: 2939749, ~/Articles/ArticleHandler.aspx, 12/19/2014 9:32:51 PM

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