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Why QuinStreet Stock Slumped Today

By Timothy Green – Updated Aug 7, 2018 at 4:44PM

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A positive report wasn't enough to keep the stock afloat after a year-long rally.

What happened

Shares of marketing products and technology provider QuinStreet (QNST 2.01%) dropped on Tuesday following a generally positive fiscal fourth-quarter report. Robust revenue growth easily beat out analyst expectations, and the company's outlook called for continued double-digit growth in fiscal 2019. The stock was down 11.2% at market close.

So what

QuinStreet reported fourth-quarter revenue of $111.5 million, up 37% year over year and about $11.5 million higher than the average analyst estimate. "Our strategies and products are meeting increased demand for performance marketing with clients and media," said QuinStreet CEO Doug Valenti.

A slumping chart.

Image source: Getty Images.

Non-GAAP earnings per share came in at $0.13, up from $0.06 in the prior-year period and in-line with analyst expectations. The company swung to a GAAP net profit of $0.10 per share, up from a loss of $0.03 in the fourth quarter of last year.

QuinStreet expects revenue to grow by at least 10% in fiscal 2019, along with adjusted EBITDA margin of roughly 10%. The company recorded an adjusted EBITDA margin of 8.6% in fiscal 2018.

Now what

While QuinStreet beat revenue estimates, guidance calling for at least 10% revenue growth in fiscal 2019 would mark a dramatic slowdown. The company grew revenue by nearly 35% in fiscal 2018.

Valuation could also be a factor in the stock's plunge on Tuesday. Shares of QuinStreet had nearly quadrupled over the past year through Monday, pushing up the market capitalization to almost $700 million. With non-GAAP net income of $22.3 million in fiscal 2018, the price-to-earnings ratio surpassed 30 prior to the report. That's not quite nosebleed territory, but it does seem high given the revenue guidance.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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