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Why Brightcove Stock Just Popped 32%

By Rich Smith – Jul 23, 2020 at 11:34AM

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Wall Street predicted a loss. Brightcove produced a profit instead.

What happened

Brightcove (BCOV -1.08%) has been in business more than 15 years, offering cloud services for publishing video on the internet and a marketing suite for monetizing those videos. It held its initial public offering (IPO) in 2012, so Brightcove's been a publicly traded company for more than half that time. Still, it doesn't make that many headlines.  

And yet, Brightcove stock leaping 31.8% this morning (in 11:30 a.m. EDT trading) is quite an attention-grabber, so...

Rising red arrow representing a stock going up being drawn on a yellow background

Image source: Getty Images.

So what

Let's take a look at why Brightcove is moving.  

In its fiscal second-quarter 2020 earnings report last night, Brightcove announced that it grew sales 1% to $47.9 million, versus the $44.9 million that analysts had predicted. The company lost money on those sales -- $0.03 per diluted share, when calculated according to generally accepted accounting principles (GAAP). But Brightcove says its pro forma profit, excluding "stock-based compensation expense, restructuring, the amortization of acquired intangible assets and merger-related expense," was $0.07 per share.

That's nearly twice what Brightcove earned a year ago, and it's better than the $0.03 per share pro forma profit that Wall Street analysts had forecast. To top it all off, Brightcove says it generated positive free cash flow in the quarter of $516,000.

Now what

The good news doesn't even stop there.

Brightcove issued new guidance forecasting more than $46 million in Q3 revenues, versus Wall Street's predicted $45.1 million. And it says it will close out the year with sales in excess of $186 million, versus the Street's guess of $182.7 million. Management also forecasts that it will be pro forma profitable for the full year -- $0.08 to $0.10 per share, which is four to five times more than analysts had been predicting.

Would we rather see those profits GAAP instead of pro forma? Sure, we would! But for the time being, pro forma profitability seems enough to keep Brightcove's shareholders happy today.

Rich Smith 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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