Thursday, December 6, 2012

Why Acacia Research Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Acacia Research (Nasdaq: ACTG  ) , a company that partners with inventors and patent owners then markets those products to corporations and shares the revenue, reported significantly better-than-expected earnings results last night and are up as much as 14% as a result.

So what: For the first quarter, Acacia reported a 62% increase in revenue to $99 million, and a non-GAAP profit that rose to $1.48 -- nearly triple what it reported last year. Both of these figures easily sailed past what Wall Street had expected and speak to the high-margin nature of Acacia's business, which has very few expenses. The company currently holds 118 technologies under license in its portfolio.

Now what: Despite today's bullish results, I'm not ready to jump on board yet for two key reasons. First, the company says itself that its portfolio revenue recognition can ebb and flow from quarter to quarter, so you have to take huge earnings beats like this with a grain of salt. Secondly, the company purchased Adaptix for $150 million and sold 6.12 million shares to raise $225 million (mainly to finance the purchase) during the quarter. There are still question marks in my mind about how Adaptix will fit into Acacia's operations and whether Acacia might dilute shareholders further. It's worth a watchlist add here, but nothing more.

Craving more input? Start by adding Acacia Research to your free and personalized watchlist so you can keep up on the latest news with the company.

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