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Why Digital Turbine Stock Soared 57% in November

By Jon Quast - Dec 4, 2020 at 10:44AM

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Digital Turbine is officially one of the top 500 growth companies in the technology space.

What happened

Shares of Digital Turbine ( APPS 4.52% ) soared 56.9% in November, according to data provided by S&P Global Market Intelligence. Companies want their apps to be downloaded by the masses, and that's what Digital Turbine's business is all about. That might not sound like much, but last month this stock market darling was recognized for its outstanding growth in this niche.

So what

To be clear, most of Digital Turbine's November gains came without a clear catalyst. Despite the company reporting quarterly results that beat analyst expectations in October, the stock fell hard to close the month. This appears to have been a short-term reaction from the market -- perhaps just some people locking in some of 2020's incredible gains. But it didn't take long for Digital Turbine to resume its upward march as the new month began.

Rising stock chart superimposed over digital map of the globe

Image source: Getty Images.

Why are investors enamored with Digital Turbine? Its profitable growth. On Nov. 19, it was included for the sixth consecutive year on Deloitte's Technology Fast 500, a list ranking the three-year growth rates of U.S. technology companies. Digital Turbine landed in the 296th spot on 2020's list, as the company's revenue grew 365% from 2016 to 2019.

Now what

Digital Turbine's fiscal calendar is a little different from a traditional calendar -- when it reported results in October, they were for the second quarter of its fiscal 2021. Through the first two quarters of fiscal 2021, the company's revenue is up 105% year over year to almost $130 million and it earned net income of over $10 million.

Some of this revenue growth is due to Digital Turbine's acquisition of Mobile Posse in February, but there's been organic growth as well. This is impressive considering Android cellphone purchases are down in 2020 and the company's software is primarily used on Android devices. If you believe the coming shift to 5G networks will spark a cellphone upgrade cycle, Digital Turbine might be a stock to place on your watch list.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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