Digital River Flows Upstream

It's starting to go smoothly again for Digital River (DRIV - Cramer's Take - Stockpickr).

The Minneapolis-based company, which handles e-commerce operations for other companies, was one hot stock for much of 2006. After dipping below $24 in November 2005, the stock had pushed above $60 12 months later -- a one-year return of 140% that few other issues could deliver.

Since then, though, Digital River has slumped a bit. Part of that is expected as a natural correction following such a breathless run-up.

But some of it stemmed from concerns that the company's efforts to expand overseas would cause costs to rise faster than revenue.

The uncertainty factor grew stronger on Dec. 22, when the Securities and Exchange Commission asked the company for documents on the stock options it gave to executives over the past eight years. Digital River's stock fell as low as $54.55 on Jan. 26, a 21% drop in a little more than a month.

Since then, Digital River has regained about half of that lost ground, much of it on Friday, when its fourth-quarter earnings report helped push the stock up 5% in a single day. On Monday, the stock closed off 25 cents to $54.81.

Digital River's 47-cent-a-share in profit it delivered on Friday was only a penny ahead of the Street's forecast. But its report showed a more modest restatement of 2006 earnings than some had expected, coupled with raised full-year guidance in line with what analysts had been forecasting. That allowed investors who believe in the stock's long-term promise to breathe a sigh of relief.