Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Imperva (NYSE: IMPV) jumped by as much as 36% during intraday trading Wednesday, then gave up some of those gains to settle up around 23% after the enterprise network security specialist easily trumped analysts' expectations with its third-quarter earnings report.
So what: Quarterly revenue rose by one-third from the same year-ago period, to $35.1 million, which translated to an adjusted net loss of $0.01 per share. For reference, analysts were looking for a significantly larger adjusted net loss of $0.05 per share on lower revenue of $34.42 million.
Going forward, Imperva also stated it expects fourth-quarter revenue in the range of $41 million to $42 million, with an adjusted net profit of $0.10 to $0.11 per share. By contrast, analysts were looking for a higher Q4 net profit of $0.16 per share on sales of $41.48 million.
Now what: When asked to clarify the reason for the lower Q4 earnings guidance, Imperva CFO Terrence Schmid replied to say they were planning on spending more on research and development, sales, and marketing -- all crucial areas for a small-cap tech company like Impervia to maintain its edge.
Even so, with shares now trading at roughly 162 times next year's estimated earnings, I think investors would be wise to approach Imperva stock with caution.