Why RPX Corp.'s Shares Popped 19% Today

A better-than-expected quarter sent shares soaring, but the price is too steep for investors.

Travis Hoium
Travis Hoium
May 3, 2017 at 12:35PM

What happened 

Shares of RPX Corp. (NASDAQ:RPXC) jumped as much as 18.7% in trading Wednesday after the patent risk and discovery management company reported earnings. At 11:30 p.m. EDT, the stock was still up 10.1% on the day. 

So what

Revenue increased 3.5% from a year ago to $82.5 million and net income jumped 41.4% to $6.0 million, or $0.12 per share. Analysts were only expecting $81.0 million in revenue, and adjusted for one-time items, earnings of $0.19 per share beat estimates by $0.06. 

Patent stamp.

Patent stamp. Image source: Getty Images.

Management also said it expects second-quarter revenue of $79 million to $82 million and net income of $5 million to $7 million. For the full year, net income is expected to be $31 million to $42 million. 

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Now what

The patent risk management market appears to be improving slightly, and the company expects net income for the year to surpass by a wide margin the $18.2 million it generated in 2016. But results could be volatile, as they often are in the patent industry. With shares trading at over 20 times expected earnings on the bottom end of the range, this is a risky bet that may not pay off without more growth than RPX is currently demonstrating.