Why LogMeIn Stock Dropped 11% Today

What happened

Shares of LogMeIn (NASDAQ: LOGM) are tumbling in Friday trading, down 4.4% as of 3:15 p.m. EDT -- and that's the good news. The bad news is that LogMeIn was down more than 11% earlier in the day, even though the company just reported earnings that broadly beat analyst estimates.

Sales in LogMeIn's fiscal Q1 2018 came in at $279.2 million, ahead of analyst expectations of $277.5 million. Profits per diluted share were $0.56 -- but $1.21 "adjusted" for one-time items. That latter number also was better than the $1.18 that analysts had predicted.

A cartoon where two men are looking at a stock chart falling through the floor.

LogMeIn beats earnings, stock crashes. Wait. What? Image source: Getty Images.

So what

What's not to like about that? The problem, it seems, lies not with what LogMeIn earned last quarter, but what it promised to earn this quarter.

In guidance included with the results, management told investors to expect pro forma profits of either $1.25 or $1.26 per share on sales of between $303 million and $305 million in Q2. That's more revenue than the $286.4 million that analysts had been telling investors to expect -- but less profit. Estimates prior to today had centered on pro forma profits per share of $1.29.

Now what

This problem with guidance may last longer than just one quarter, too. Looking further out, LogMeIn also predicted that it would earn pro forma profits of between $5.20 and $5.31 per diluted share on sales of $1.205 billion to $1.220 billion for the full year. Relative to Wall Street's expectations, once again, LogMeIn's revenue number looks likely to exceed estimates, while profits fall short.

Meanwhile, full-year GAAP guidance for the company is even worse. LogMeIn says it will probably earn no more than $0.96 per share, which makes its stock look rather expensive at $114 per share, with a triple-digit price-to-earnings (P/E) ratio.

Long story short, 2018 could be a long year for LogMeIn investors.

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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.