Perhaps among the cacophony of guidance revisions, gyrating oil prices, and presidential election polls, investors yesterday only had enough time to scan announcements and focus on the negatives.

How else can one explain the market's reaction to Audible's (NASDAQ:ADBL) recent third-quarter results? Earnings were announced one hour before market close, at 3 p.m. ET, and the stock's price dropped 10% within minutes (it recovered to close down 3% for the day). Today, though, investors must have heard sweet music, sending shares of the spoken-word content company up nearly 13% to $22.15.

What's not to like? Audible posted its second profitable quarter, with earnings of $0.02 per share, in line with analyst estimates. Total revenues for the quarter rose 87% compared with last year and 15% over the previous quarter. The company added 40,000 new subscribers, kept churn at its historical 3% rate (Audible doesn't report total subscriber levels, only monthly additions and churn levels), and raised revenue guidance for the 2004 fiscal year by about 10%.

One possible area of concern is the rise in costs of acquisition from $40 to $45 per subscriber. But with an expected lifetime value of each subscriber north of $400 and predictable purchasing levels, the increase isn't as concerning as it would be for an outfit like Netflix (NASDAQ:NFLX), where churn rates are higher.

Amid such great news, Audible's stock probably initially dropped due to its valuation and the market's expectations. The stock has been on a tear, rising by almost 500% since being put on the Motley Fool Hidden Gems Watch List in November 2003 and written up in a Fool commentary. Back then, the company was a true undervalued penny stock. Today, with a hefty price-to-earnings ratio of 65 on expected 2005 earnings of $0.35 and shares trading on the Nasdaq, it's in a different category.

Why does Audible carry such a premium? And, more importantly, is it worth it?

Its exclusive deal with Apple (NASDAQ:AAPL) means that for many providers of audio content, the road to the ubiquitous iPod runs through Audible. In addition, the company operates in a virtual vacuum, as there are no competitors to match its digital library of over 18,000 audio books and exclusive access to audio editions of Car Talk, Forbes, and The New York Times Audio Digest. Finally, a service that allows you to download books, magazines, and recorded radio programs straight to your MP3 player is undoubtedly cool.

With its earnings projected to grow 40% annually over the next half-decade and CEO Donald Katz's legitimate mention of the similarities between Audible's business model and that of Netflix from 2002 to early 2004, it's difficult to call the company overvalued. Like Starbucks (NASDAQ:SBUX) or Chico's (NYSE:CHS), some companies are never available cheap -- the sheer size of Audible's potential market could create the same effect.

With a market capitalization of over $400 million, Audible may very well have a place as a speculative play in the corner of your portfolio.

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Fool contributor Marko Djuranovic owns shares of Netflix and no other company mentioned in this article. He wonders if any of the Motley Fool audio books available on Audible's website are read by David or Tom Gardner.