NEW YORK (TheStreet) -- Rocket Fuel (FUEL - Get Report) made the negative headlines all too easy to write. The digital advertising company, whose motto is "artificial intelligence, real results," failed to deliver the first-quarter results that investors wanted.
$FUEL Misguided missile? Teresa Charpentier (@Caviar) May. 9 at 11:24 AM
$FUEL this rocket has no fuel - target 18? Old Turkey (@Partridge) May. 9 at 09:26 AM
The stock fell nearly 22% by the close Friday, to just under $22-per-share -- and continued to fall after-hours. A handful of analysts, including oft-watched Goldman Sachs, cut price targets in the wake of declining revenue growth. The company guided for revenue growth Thursday evening of between 62% and 69% in the second quarter of 2014. The projected growth was a substantial slowdown from the 95% year-over-year growth seen in the first quarter.
But investors on StockTwits.com said Friday that the stock shouldn't have crash landed. Sentiment on the stock was 70% bullish, according to StockTwits' analytics.
Earnings weren't exactly bad. Rocket Fuel reported a smaller-than-expected earnings per share loss of 18 cents, excluding some items. Consensus estimates called for a loss of 30 cents. Revenues, however, were light. The company reported $74.4 million instead of the $76.2 million analysts had anticipated, according to stats on the Analyst Ratings Network.
Rocket Fuel said sales would come in in between $88 million and $92 million. It guided for a loss of between $6 million and $4.5 million. That wasn't enough for some analysts to justify the company's valuation. After Friday's fall, the company still had a $739.6 million market cap. It trades at 57 times expected 2015 earnings.
Goldman Sachs downgraded the company today to neutral from buy. The analyst lowered the price target from $69 to $25 per share, citing concerns about declining average customer spending, according to the Analyst Ratings Network. BMO Capital Markets also downgraded the stock from outperform to market perform with a $25 target. Oppenheimer analysts maintained an outperform rating but lowered their price target to $44 per share. Evercore Partners reiterated an equal-weight rating and cut its target from $30 to $17 per share.
On Friday, StockTwits' investors said the ratings cuts were overdone. They argued that Rocket Fuel still expects to be profitable this year -- which is more than can be said for other hot IPO companies. Rocket Fuel management guided to profits somewhere between $3 million and $6 million on more than $420 million in sales.