SPRT Stock: Is Market Overreacting To 'Minor Risks' In Earnings Report’?

Support.com Inc

Support Inc (NASDAQ:SPRT), one of the stocks in our positive watchlist, came out with its earnings report after market hours on Oct 31. The company reported a good quarter with the only negative in the conference call being the falling revenues from the Signature support program. We will take a closer look at the quarterly performance and our opinion on the same.

SPRT Stock Performance

In millions of USD, except per share data Q3 2013 Q3 2012 YoY change(as %)
Revenue 23.36 18.18 28.5%
Operating Profit 3.03 0.32 846.9%
Operating Margins 13.0% 1.8% 11.2%
Net Income 3.03 0.29 944.8%
Net Income Margin 13.0% 1.6% 11.4%

Support Inc Stock: Actual Performance v/s Analyst Estimates

The company trumped analyst estimates on both the topline as well as the bottom line. The topline (revenues) grew by 28.5% Y/Y against Streetinsider analyst consensus estimate of 18.3% revenue growth. The company also beat the Streetinsider’s earnings consensus estimate of 3 cents per share. The company saw non-GAAP earnings per share of 8 cents in the quarter, an earnings surprise of 166%.

SPRT Earnings Guidance For Q4 2013

The management gave a revenue guidance range of $24 million to $26 million for the fourth quarter of 2013. At its midpoint, $25 million, the guidance represents a Y/Y growth of 32% over Q4 2012 and a sequential increase of 7% over Q3 2013. The company also guided the non-GAAP EPS for Q4 2013 to be in the range of 6 cents to 8 cents. The average EPS guidance of 7 cents will represent a 5 cent increase over Q4 2012.

Conclusion

The SPRT stock which has been on our positive watchlist for over three months now, continues to be a stock to watch out for. The strong results delivered by the company supports our opinion of the fundamental strength of the company while the strong Q4 2013 guidance highlights the management’s confidence to continue the good work. The stock was trading at an LTM price-to-earnings multiple of 200 in April 2013 following its Q1 2013 earnings report making it an expensive and risky bet after Q1 2013. However, today the Support Inc stock is trading at a more respectable and relatively low LTM P/E multiple of 32, a fact reflecting the growth in earnings which has happened over the last two quarters. We continue to hold a positive opinion on the company over the long term and will be looking out for possible entry points into positions in the SPRT stock.

To see the latest SPRT stock price movement, click on SPRT stock chart.

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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