Why DealerTrack Holdings' Shares Dropped Temporarily
Nov 9th 2012 4:48PM
Updated Nov 9th 2012 4:56PM
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 DealerTrack Holdings (NAS: TRAK) , a provider of web-based software to the automotive industry, shed as much as 12% before rebounding to be down just 3% as of this writing, following its third-quarter earnings results.
So what: For the quarter, DealerTrack recorded a 3% increase in revenue, to $99.1 million, and an adjusted profit of $0.28. Both results fell slightly shy of the Wall Street consensus, which called for $99.5 million in sales and a profit of $0.30. What appears to be making up for the shortfall is the company's updated full-year guidance, which was slightly boosted from its own previous forecasts to a revenue range of $387 million to $390 million, and EPS of $1.08-$1.12, which (using the midpoint of EPS) are both slightly higher than current Street expectations.
Now what: DealerTrack has provided investors with a nice balance of organic growth and growth by acquisition, acquiring ClickMotive to broaden its digital retailing potential, and Ford's (NYS: F) Canadian iConnect direct marketing solutions division. The only concern I have is whether we've given the company too frothy a valuation -- 20 times forward earnings -- given that global consumer spending is weak and auto sales have slowed since mid-year. For now, this is one I'd rather watch from the sidelines.
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The article Why DealerTrack Holdings' Shares Dropped Temporarily 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. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of, and creating a synthetic long position in, Ford. 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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