PRO articles cover stocks that fly under most investors' radar screens.
Rocket Fuel: Better To Buy Than Sell
- FUEL dropped 25% after hours as investors worried about guidance, but this is an overreaction.
- The second quarter was actually a beat thanks to mobile growth and strong gross margins, which suggests solid pricing power.
- Still, guidance was weak, but growth is still 65%, and some growth is being pushed back not lost due to tighter ad budgets.
- At 1.7x sales, FUEL is not ridiculously valued, and shares are more likely to rally than fall from here.
Consider Buying Rocket Fuel
- Rocket Fuel shares fell 25% Thursday afternoon as the company offered very disappointing second quarter guidance.
- Second-quarter growth will decelerate to about 65% from 95% in the first quarter and 137% last year as customers spend less with Rocket Fuel amid tough competition.
- Still, shares are trading less than 2x sales, so the bad news is fully priced into shares.
- The major downside risk is the entrance of a large tech company into the space, though there is the possibility a larger firm simply buys Rocket Fuel.
- Given this context and the low valuation, the money has been made on the short side, and going long is the better trade from here.
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