Audible's Case Gets Louder

Shares of Audible (ADBL - Cramer's Take - Stockpickr) popped early on Wednesday after the company's quarterly report the day before beat Wall Street's top-line estimates. However, whether the online-entertainment content provider has indeed turned a corner -- and whether investors should dive in -- remains up for debate.

First the good news: Analysts were certainly pleased with the company's lower customer acquisition costs and churn (turnover) rates, which had weighed on results last quarter.

"They did a lot of things right -- all key subscriber metrics improved sequentially quite significantly," says Richard Fetyko, a senior vice president and research analyst with Merriman, Curhan, Ford, who has a buy rating on the stock. "We're starting to see operating leverage, meaning that we're seeing the revenue increase flow down to the EBITDA line."

He attributed Wednesday's stock move -- returning near its highs for the year -- as a playing out of the stock's 30% short position, since "things are improving, not deteriorating." Fetyko does not own Audible shares. His firm makes a market in Audible.

The company said late Tuesday that it recorded a first-quarter loss of $3 million, or 12 cents a share, vs. a profit of $891,000, or 3 cents a share, a year earlier. Operating expenses expanded to $23.4 million from $21.9 million a year earlier.

But revenue totaled $19.7 million for the quarter, surging 53% from the same quarter last year. Those sales were a shade higher than the expected $19.3 million analyst average estimate.

And the total number of customers acquired during the quarter was 98,700, representing growth of 38% year over year.

The company also seems to have worked out the hiccups in its Web site, probably helping its customer acquisition costs, which were the lowest since last year's first quarter.

In December, Audible modified its subscriber plans in an effort to attract more customers as well as retain them.