Why Demandware Shares Popped

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 Demandware are up nearly 9% today, after peaking at an 11% gain this morning. The stock is enjoying renewed interest after beating Wall Street's expectations on top and bottom lines.

So what: Demandware's revenue for the fourth quarter came in at $26.3 million, and its adjusted earnings per share were $0.10. Both results beat the analyst consensus, which sought $23.5 million in revenue, and $0.03 in EPS. This big beat was due to impressive growth on a number of key metrics. For the full year, Demandware's live customer base increased 50%, its live sites under management grew 60%, and twice as many customers (14) drove $100 million in gross merchandise sales in 2012 as it did in 2011. Subscription revenue grew 40% year over year in the fourth quarter, and a number of well-known new customers came on board.

Now what: This sort of growth often gets the market to sit up and pay attention. However, Demandware is still losing money on a GAAP basis, and has only a sliver of positive free cash flow. It's worth keeping your eye on the company, but today might not be the best time to open (or increase) a position.

Want more news and updates? Add Demandware to your Watchlist now.

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The article Why Demandware Shares Popped originally appeared on Fool.com.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology.The Motley Fool has no position in any of the stocks 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 Motley Fool has a disclosure policy.

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