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Why Veritone, Inc. Shares Fell 30% Last Month

Anders Bylund, The Motley Fool

What happened

Shares of Veritone (NASDAQ: VERI) fell 30.1% in August of 2018, according to data from S&P Global Market Intelligence. One intense day near the middle of the month, Veritone announced two acquisitions alongside a disappointing earnings report. Share prices plunged more than 20% lower in that trading session.

So what

The provider of data-analysis tools based on an artificial intelligence platform saw second-quarter revenues rise 14% year over year, to $4.2 million. On the bottom line, adjusted net losses of $0.88 per share represented a 33% improvement over the year-ago period. But analysts were expecting better results across the board, aiming for a net loss of $0.85 per share on revenues near $4.9 million.

The company also bought out podcast agency Performance Bridge Media for $6 million and video licensing service Wazee Digital for another $15 million. Revenue from these two companies added up to $23 million in 2017, so Veritone should more than double its annual top line here.

Two young businesspeople shrug at a computer screen in apparent confusion

Image source: Getty Images.

Now what

Both the Wazee and Performance Bridge deals were structured as part-cash, part-stock packages. The stock-based portion will dilute Veritone's stock base by roughly 7%, which explains a small part of August's sudden price drop.

The rest can be chalked up to uncertainty around a small and largely unknown business with lumpy quarter-to-quarter results. Management isn't in the habit of offering firm financial targets, leaving analysts and investors to come up with estimates on their own. (It's like chasing chameleons in a dark room, when your flashlight is out of batteries.) Earnings misses are common in that scenario, and so are wild overreactions to the results.

Personally, I think Veritone could extract some serious value out of the two low-cost acquisitions. I'm sticking a thumbs-up CAPS rating on the stock at this low point, to help me keep a closer watch on Veritone.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.