NEW YORK (TheStreet) -- Shares of Digital River (DRIV) were falling 24.4% to $19.28 Monday after the Internet software and services company disclosed that it gave Microsoft (MSFT) an extension to decide on extending their distribution agreement.
Digital River extended the deadline for Microsoft's decision to Dec. 19, 2014 from Dec. 1, 2014. The extension grants Microsoft an additional 18 days to decide if it wants to extend the expiration date of the Microsoft Operations Digital Distribution Agreement between the two companies that is dated Sept. 1, 2006.
As part of their current agreement Digital River builds, hosts, and manages Microsoft's online store that sells both hardware and software.
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TheStreet Ratings team rates DIGITAL RIVER INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate DIGITAL RIVER INC (DRIV) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Powered by its strong earnings growth of 154.16% and other important driving factors, this stock has surged by 47.61% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- DIGITAL RIVER INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, DIGITAL RIVER INC continued to lose money by earning -$0.57 versus -$5.61 in the prior year. This year, the market expects an improvement in earnings ($0.51 versus -$0.57).
- Despite currently having a low debt-to-equity ratio of 0.38, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that DRIV's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.96 is high and demonstrates strong liquidity.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, DIGITAL RIVER INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $5.53 million or 69.91% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: DRIV Ratings Report