Demand Media Shares Surged: What You Need to Know

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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 online content company Demand Media (NYS: DMD) soared 22% today after its quarterly results topped Wall Street expectations.

So what: Demand Media shares have been crushed over the past year on spiking costs and weak traffic, but a big fourth-quarter beat -- adjusted EPS of $0.08 versus the consensus estimate of a $0.01 loss -- suggests that the worst may be behind it. Management even expects revenue to accelerate significantly by the second quarter, triggering fresh hopes for double-digit growth, as well.  

Now what: Looking ahead, management sees 2012 adjusted EPS of $0.30-$0.32 on revenue of $351 million-$358 million. "We enter 2012 positioned to expand our existing business lines while investing in areas where we see significant future growth," Chairman and CEO Richard Rosenblatt said. "We plan to leverage our data, studio and extensive distribution in new ways to solidify our leadership in the rapidly growing digital content marketplace." Of course, given Demand Media's still-unproven business model and shaky fundamentals, only speculative investors should consider buying into that optimism.  

Interested in more info onDemand Media?Add it to your watchlist.

At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.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 Fool's disclosure policy always gets a perfect score. 

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