Please ensure Javascript is enabled for purposes of website accessibility

Why Marketo Inc. Shares Plunged Today

By Brian D. Pacampara, CFA – Feb 12, 2014 at 11:45AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Is this meaningful? Or just another movement?

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 cloud-based software specialist Marketo Inc (NASDAQ: MKTO) sank 11% today after its quarterly results and outlook disappointed Wall Street.

So what: The stock has rebounded sharply in recent months on signs of a bottom-line recovery, but today's Q4 results -- loss widened to $15.5 million -- coupled with downbeat guidance is forcing Mr. Market to quickly sober up. While year-over-year revenue surged 67%, to $28.2 million, gross margin fell 220 basis points sequentially, suggesting that Marketo's competitive edge is becoming increasingly expensive to maintain.

Now what: Management now sees a full-year adjusted loss of $1.09-$1.15 on revenue of $130 million-$135 million, versus Wall Street's view of a $0.82 per-share loss on revenue of $126 million. "Marketers have stepped forward as the stewards of customer experience and lifetime value in their organizations," Chairman and CEO Phil Fernandez said. "As we look into 2014, we are more excited than ever about the opportunities ahead as we continue to earn new customers, expand into our existing customer base, and extend our track record of thought leadership and innovation." Of course, with the stock still up more than 100% from its 52-week lows, and trading at a lofty price-to-sales around 20, I'd wait for an even wider margin of safety before buying into that bullishness. 

Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.