Why Constant Contact Shares Dropped
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 marketing consulting firm Constant Contact (NAS: CTCT) are out of touch with investors today, falling as much as 18% after the company reported its first-quarter results and provided guidance for the second quarter.
So what: For the quarter, Constant Contact added 45,000 paying customers and reported a 20% increase in revenue to $59.9 million. It also reversed a year-ago loss and reported an adjusted profit of $0.09 per share. This was good -- just not good enough! Wall Street had been expecting the company to earn $0.10 a share on sales of $59.4 million. What's undeniably bad is the $0.14-$0.15 in EPS that Constant Contact is forecasting for the second quarter, considering that the Street had been looking for $0.19. Revenue forecasts, however, met the consensus estimates.
Now what: Today's guidance is confusing to say the least, as the company has been adding customers and increasing its average revenue per user -- a key metric for a marketing firm like Constant Contact. It's very hard to say if this is merely a hiccup in the company's growth or a changing of the wind. As of now, I'm inclined to believe it's just a hiccup, but following the huge run that the stock has had since last summer, I'm perfectly fine waiting it out another quarter or two to see if Constant Contact can find its swagger again.
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At the time this article was published 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.Motley Fool newsletter services have recommended buying puts on Constant Contact. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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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