Why WebMD Shares Imploded

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 health information services software provider WebMD (NAS: WBMD) are plunging yet again after the company reported preliminary second-quarter and full-year results.

So what: It seems like every three months I find myself writing about another WebMD cliff dive. For the second quarter, WebMD expects to report a loss of $0.12 on $112 million in sales. Wall Street had actually been looking for a profit of $0.04 on $115.1 million in sales. Worse yet, WebMD drastically lowered its full-year forecast. It now anticipates reporting a loss of $0.23-$0.44 for the year on revenue of $455 million-$480 million as compared to its forecast just two months ago for a profit of $0.05-$0.37 on sales $500 million-$535 million. WebMD blames a reduction in advertising from drug companies tied to an extraordinarily large amount of patent expirations and review delay from the FDA as the primary reasons for the shortfall.

Now what: I didn't like it in January, I didn't like it in April, and I don't like WebMD now after today's tumble. In January, I complained that paying nearly 30 times forward earnings was far too much. Now, with losses expected over the near term and visibility terrible, I'd have to say that continuing to avoid this company is one of the better calls I've made. Until visibility improves, this is not a stock worthy of your money.

Craving more input? Start by adding WebMD to your free and personalized Watchlist so you can keep up on the latest news with the company.

The article Why WebMD Shares Imploded originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.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 Motley Fool has a disclosure policy.

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