What happened

Shares of TechTarget (NASDAQ:TTGT) fell as much as 27% lower this morning, recovering to a milder 18% decline as of 11:45 a.m. EDT. The provider of online marketing and sales services beat analyst estimates across the board in Wednesday night's second-quarter report, but the surprises weren't big enough to sustain TechTarget's skyrocketing market momentum today.

So what

TechTarget's second-quarter sales rose 18% year over year to land at $31.5 million. Adjusted earnings more than doubled from $0.09 to $0.21 per diluted share. Your average analyst would have settled for earnings of $0.19 per share on sales near $30.8 million.

Over the same period, gross margins expanded from 73% to 77% while adjusted EBITDA profit margins jumped from 20% to 29%.

Businessman precariously balancing on a tightrope high above the city.

Image source: Getty Images.

Now what

CEO Michael Cotoia sees plenty of room fur further bottom-line growth, as rising revenue should help TechTarget continue its margin expansion trends. In the long run, Cotoia sees an opportunity to reach 40% adjusted EBITDA margins.

This was TechTarget's third consecutive earnings surprise. Don't cry for this company's investors, who simply took some profit off the table here. Stock prices have still tripled in 52 weeks and doubled in 2018 alone. TechTarget's business results are undeniably strong these days but the stock is trading at nosebleed valuation ratios. Maybe it's best to watch this volatile rocket ride from the sidelines until the margin story plays out.

Anders Bylund 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.