A Full Body Contact Earnings Report Leaves Investors in Bandages (CTCT)

Equity buyers and sellers have played a game of bumper cars lately as they try to decipher the latest corporate financial reports and guiding comments. The earnings season has become a contact sport for traders. While Wall Street concentrated on Apple’s (NASDAQ: AAPL) earnings last night, Constant Contact (NASDAQ: CTCT) put out some numbers that had investors looking for the first-aid kit by the time the market opened this morning. The mass marketing company released third-quarter results yesterday after the close of the market, which showed a 17% increase in revenues year over year. Constant Contact posted earnings of $0.20 per share, or a nickel better than what analysts had forecasted. Revenues, however, fell a tad shy of Wall Street estimates. The company even raised its earnings per share guidance for the full year to $0.54-$0.56 from $0.51-$0.55 with revenues coming in shy of previous forecasts.

Then shareholders got body-slammed. The company now foresees fourth-quarter revenues and earnings per share below the fourth-quarter prognostications of Wall Street. Constant Contact warned that the company would earn between $0.14 and $0.16 per share versus the consensus view of $0.18. The reason for the less-than-optimistic outlook is the disappointing customer additions in the third quarter, which is a trend the company expects to continue in the coming quarter.

This morning, Wall Street threw another punch as a handful of analysts downgraded the stock. Most took their rating down from “buy” to “hold”. Before the downgrades, the consensus view had placed a $23.57 price target on Constant Contact shares.

Sellers literally crushed buyers at the opening bell. The stock gapped down $4.15 from the closing price on Thursday to start the final session of the week at $12.88. An ill-fated rally after the opening took share prices to a daily high of $13.41. The first 30 minutes saw volume pouring in at a rate greater than five times the number of shares traded on an average day. The selling continued almost without pause throughout the entire trading session. By the end of the day, the stock not only traded at a new annual low of $11.82, but also traded at prices not seen in four years. Shares finished the day with a loss of nearly 30%. The stock closed down $5.10 to end the week at $11.93. Traders exchanged eight million shares on the day compared to the 355,000 shares swapped on an average day.

Constant Contact shares hit an annual high $32.18 in February. In April, the company warned investors that its second quarter earnings would fall below the expectations of analysts. The announcement set off a three-month selling spree that culminated in a 52-week low, until today, of $15.66. The stock appeared to sit on more solid footing over the last two months with shares rallying above $20.51. The question for traders and investors is whether the stock can find any stability at these levels or if there is more downside to come.

Constant Contact is a mass marketer providing clients with email marketing, social media marketing, event marketing, local deals and online surveys. The Walham, Massachusetts-based company was founded in 1995.

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Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email (alanmasterson@wallstreetpr.com) or his Google+ page (https://plus.google.com/103338576216002376250).