If an investor bought Divx (DIVX) three months ago at the peak of the buying frenzy in the company’s stock, he would only be down about 32% now.
What happened?
Wall St. is concerned that the company is not growing very fast anymore. Revenue in the fourth quarter of 2006 was $16.7 million. The first quarter is being forecast at $17.3 to $19.3 million. At the lower end that is only 3.5%.
For the nine months ending September 30, 2006, revenue rose 93%. But, for the three month period ending September 30, revenue was up only 77%. In 2004 and 2005 revenue roughly doubled over the previous year.
It’s easy to see Wall St.’s concern. The company still trades for 11.6x sales.
Douglas A. McIntyre
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