What happened

Shares of Veritone (NASDAQ:VERI) fell 30.1% in August of 2018, according to data from S&P Global Market Intelligence. One intense day near the middle of the month, Veritone announced two acquisitions alongside a disappointing earnings report. Share prices plunged more than 20% lower in that trading session.

So what

The provider of data-analysis tools based on an artificial intelligence platform saw second-quarter revenues rise 14% year over year, to $4.2 million. On the bottom line, adjusted net losses of $0.88 per share represented a 33% improvement over the year-ago period. But analysts were expecting better results across the board, aiming for a net loss of $0.85 per share on revenues near $4.9 million.

The company also bought out podcast agency Performance Bridge Media for $6 million and video licensing service Wazee Digital for another $15 million. Revenue from these two companies added up to $23 million in 2017, so Veritone should more than double its annual top line here.

Two young businesspeople shrug at a computer screen in apparent confusion

Image source: Getty Images.

Now what

Both the Wazee and Performance Bridge deals were structured as part-cash, part-stock packages. The stock-based portion will dilute Veritone's stock base by roughly 7%, which explains a small part of August's sudden price drop.

The rest can be chalked up to uncertainty around a small and largely unknown business with lumpy quarter-to-quarter results. Management isn't in the habit of offering firm financial targets, leaving analysts and investors to come up with estimates on their own. (It's like chasing chameleons in a dark room, when your flashlight is out of batteries.) Earnings misses are common in that scenario, and so are wild overreactions to the results.

Personally, I think Veritone could extract some serious value out of the two low-cost acquisitions. I'm sticking a thumbs-up CAPS rating on the stock at this low point, to help me keep a closer watch on Veritone.

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.