Why LogMeIn Inc Shares Soared 20% Today

Is this meaningful? Or just another movement?

Brian D. Pacampara, CFA
Brian D. Pacampara, CFA
Apr 30, 2014 at 1:38PM
Technology and Telecom

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 company LogMeIn Inc (NASDAQ:LOGM) surged 20% today after its quarterly results and outlook topped Wall Street expectations.

So what: The stock had pulled back sharply in recent weeks on worries about slowing growth, but today's Q1 results -- adjusted EPS spiked 83% on a revenue jump of 31% -- coupled with upbeat guidance are quickly easing those concerns. In fact, LogMeIn's adjusted operating margin during the quarter increased 200 basis points, to 20%, suggesting that its cost structure and competitive position are improving, as well.

Now what: Management now sees full-year EPS of $0.10-$0.17 on revenue of $209.0 million-$212.0 million, up from its prior view of $0.07-$0.16 and revenue of $198.0 million-$202.0 million, respectively. According to CEO Michael Simon.

We made significant progress on our three key growth drivers -- join.me, SMB IT, and our IoT efforts around Xively. In addition, a decision to transition our remote access service to a premium-only offering helped deliver results in both new subscribers and new sales that exceeded our expectations. As a result, we are now forecasting 26 to 27 percent revenue growth in 2014.

Of course, with the stock now up about 120% from its 52-week lows, and trading at a 40-plus forward P/E, much of that potential might already be baked into the price.