ReachLocal Shares Popped: What You Need to Know

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 marketing and analytics specialist ReachLocal (NAS: RLOC) climbed 14% Wednesday after its quarterly loss wasn't as big as Wall Street's forecast.

So what: ReachLocal's second-quarter revenue came in a bit light, but given how much the stock has been beat up over the past three months, the lower-than-expected loss -- $0.03 per share versus the average analyst estimate of $0.13 -- comes as a much-needed surprise. With that wide of a beat, investors are naturally betting that management can keep the positive bottom-line momentum going.

Now what: I'd remain on the sidelines for now. While CEO Zorik Gordon said that ReachLocal intends to "expand into another European country before the end of the year, and into Asia by early 2012," the sputtering domestic economy and "amazingly competitive" operating environment should continue to weigh on results. In fact, the company lowered its current-quarter and full-year revenue outlook on those concerns, suggesting that things aren't as rosy as today's rally indicates.

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At the time thisarticle was published Fool contributorBrian Pacamparaowns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of ReachLocal. 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'sdisclosure policyalways gets a perfect score.

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