The micro-cap company operates a mobile- and web-based entertainment platform that incentivizes consumers for watching TV, listening to music, and engaging with its app. It uses that data to serve up more relevant content and help its partners market more effectively to the user.
Apparently Wall Street was blown away by Viggle’s most recent quarter, as the VGGL stock price roared higher in early trading on Monday. In the first half-hour of trading, VGGL stock was so actively traded that it was seeing 60 times normal volume for that time of day.
Viggle’s Numbers: Not Actually That Good
It’s true that Viggle’s numbers in the quarter ended March 31 show explosive growth — that much is hard to deny. Revenue grew 52% year-over-year and the entertainment platform also saw a 116% increase in net registered users.
The Viggle app is available on Apple Inc. (NASDAQ:AAPL) devices, Google Inc (NASDAQ:GOOG, NASDAQ:GOOGL) Android devices, and Microsoft Corporation (NASDAQ:MSFT) Windows devices, so it’s got all it’s bases covered there. Distribution shouldn’t be a problem.
What then, IS the problem with VGGL?
Namely, the fact that it can’t make a buck to save its life. Also, VGGL quarterly results missed on both revenue and EBITDA, as operating losses continue to baloon.
Viggle revenues clocked in at $5 million in the quarter, missing analyst estimates of $7 million by a mile. Adjusted EBITDA was -$8.7 million against consensus -$7.3 million, and operating losses were up nearly 37% year-over-year, to $19.7 million.
Yes, that’s right. Viggle posted operating losses of nearly $20 million on $5 million in revenue last quarter and VGGL stock instantly soared 60% higher to start the day. Madness. Viggle’s rise can only be attributed to a euphoric reaction to news that the company doubled its user base.
That sort of neglect for cold, hard financial metrics in favor of non-traditional metrics that are supposed to foreshadow future growth sounds distinctly familiar … Oh, that’s right — that’s the line of logic that got us into the dot-com bubble. In some cases, page views somehow supplanted revenue and EPS as the best indicator of a company’s health.
Today, as we see with VGGL, the poorly chosen leading indicator of our times is the userbase.
If you can’t tell already, I’d recommend staying far away from VGGL stock. But if you absolutely feel compelled to trade it or to buy it, please do yourself a favor and use limit orders to buy and stop-loss orders to sell. Viggle’s business is losing enough money on its own — no need for you to do the same.
As of this writing John Divine was long shares of AAPL stock, GOOG stock, and GOOGL stock. You can follow him on Twitter at @divinebizkid or email him at firstname.lastname@example.org.