Why Cantaloupe Stock Exploded 11% Higher Today

What happened

Shares of digital payments and data processing company Cantaloupe (NASDAQ:CTLP) soared 11.6% through 11:25 a.m. ET on Wednesday after beating analyst forecasts for quarterly sales and guiding higher than Wall Street had expected.

Heading into fiscal Q2 2023, analysts had predicted Cantaloupe would lose $0.01 per share on sales of $58.8 million. Cantaloupe hit the earnings nail on the head and eclipsed sales predictions, reporting revenue of $61.3 million for the quarter.

So what

"Transaction fees, subscription fees and total revenue" all set new records in fiscal Q2, boasted Cantaloupe CEO Ravi Venkatesan, with total revenue rising 20% year over year even as total dollar volumes of transactions processed rose only 17%. Gross margins, however, slipped 120 basis points lower, to 30.1%, preventing Cantaloupe from capitalizing fully on the sales growth, and leaving the company operating at a loss -- same as in last year's Q2.

Now what

Looking through the end of this fiscal year, Cantaloupe only reiterated its prior guidance (i.e., despite the better-than-expected sales in Q2, the company did not raise guidance for the year by a similar amount). This implies that Q2 sales growth was more a matter of timing (occurring in Q2, rather than Q1 or Q3, for example) than of actual above-average growth.

On the plus side, though, at least sales didn't slow. Cantaloupe still believes it will generate sales of between $240 million and $250 million this year and that it has a better-than-even chance of earning a profit for the full year. Earnings as calculated according to generally accepted accounting principles (GAAP) should range from a loss of $0.03 per share to a profit of as much as $0.04 per share.

With analysts predicting Cantaloupe will lose $0.01 for the full year, that's a slightly better prediction than Wall Street was looking for. It explains why even mediocre results are having an outsize positive effect on Cantaloupe stock today.

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Rich Smith 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.