Why Digital River Shares Sank
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What: Shares of online commerce technologist Digital River (NAS: DRIV) plunged 12% on Friday after its current-quarter guidance disappointed Wall Street.
So what: Digital River's first-quarter results managed to squeak past estimates, but a lower-than-expected, second-quarter outlook is forcing investors to lower their valuation estimates. Specifically, soft international demand, coupled with rapidly rising costs, seems to be triggering serious concerns over its future profitability.
Now what: For the current quarter, management now sees adjusted EPS of $0.17-$0.19 on revenue of $92 million-$94 million, well below Wall Street's view of $0.23 and $95.3 million. "While we are maintaining a slightly cautious outlook on the European economy," CEO Joel Ronning reassured investors, "we continue to invest for the future, developing some great products in cloud-based subscriptions." More important, with the stock now down about 50% over the past year and sporting a forward P/E of 12, those long-term growth prospects might be available on the cheap.
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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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