Please ensure Javascript is enabled for purposes of website accessibility

Why WebMD Shares Soared Higher Today

By Todd Campbell – Feb 24, 2016 at 4:16PM

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

Solid financial results and guidance is sparking a rally.

Source: Flickr user JFCherry

What: After reporting fourth quarter financials, shares of WebMD (WBMD) jumped by as much as 10% Wednesday.

So what: The widely known medical content provider reported sales and earnings per share of $192.1 million and $0.60, respectively, for the fourth quarter, both of which were ahead of industry watchers guesses.

The company also said its full year sales grew 10% to $636.4 million and its net income improved to $1.48 per share from $1 per share in 2014.

The top- and bottom-line performance was driven by an increase in ad revenue that was supported by a 7% increase in page views during the quarter.

Now what: Because wealthy and technology-savvy baby boomers are turning 65 at a pace of 10,000 people per day, high-quality online content is increasingly valuable and that's likely to continue to support ad rates, sales, and profit at WebMD.

Those tailwinds have led to speculation that an acquirer may make a bid for WebMD, however, WebMD's management said in January that it wasn't "currently" in negotiations to be acquired.

Therefore, investors shouldn't buy shares in WebMD in hopes a suitor may emerge, but instead should consider picking up shares because of the company's improving business. In that regard, the story is compelling. WebMD management thinks sales will grow between 8% to 11% and net income per share will total between $1.75 and $1.90 this year and since that's better than Wall Street estimates, the rally in WebMD shares may not be over. 

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies 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.

Premium Investing Services

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