Why Phoenix New Media Ltd. Shares Plunged

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 Phoenix New Media Ltd. dropped more than 11% Thursday after the company reported mixed quarterly earnings results.

So what: Quarterly revenue rose 32.3% year over year, to $61.9 million, which translated to adjusted net income of $0.17 per share. Analysts, by contrast, were looking for adjusted earnings of $0.13 per share on sales of $62.3 million.


However, the company also stated it expects sales to fall sequentially to a range of $60.15 million to $61.8 million -- not something investors generally want to see from a small-cap growth stock trading around 29 times last year's earnings.

Now what: Still, the strong quarterly results were enough to spur analysts at JPMorgan to both reiterate their "overweight" rating on Phoenix New Media, while raising their price target by one dollar to $15 per share. To explain the reiteration, JPMorgan noted, "China's media consumption continues to shift from online to mobile, as evidenced by the 400% YoY growth in the iFeng News app's daily active users."

To be sure, its safe to expect that transitition to continue, and companies like Phoenix New Media are positioned especially well to benefit. While I'm not personally compelled enough to buy shares just yet, given the sequential lull in growth, at the very least, I think investors would be wise to add the stock to their watchlists.

In the meantime, consider these three solid picks for your portfolio
As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal The Motley Fool's 3 Stocks to Own Forever. These picks are free today! Just click here now to uncover the three companies we love. 

The article Why Phoenix New Media Ltd. Shares Plunged originally appeared on Fool.com.

Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of JPMorgan Chase. 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.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

Add a Comment

*0 / 3000 Character Maximum