Citing its sharply higher fourth quarter costs, Rocket Fuel reported a much larger loss than the market was expecting. Unsurprisingly, the shares of this digital advertising company have crashed by 22%. This is a massive loss for investors who are excited about the use of big data as applied to online commerce and advertising. Rocket Fuel (NASDAQ:FUEL) is one of the big proponents of big data, artificial intelligence, data mining, and number crunching technology in the online advertising space.
From the looks of it, there is a lot of potential for this space. You have to understand that online marketing and advertising is largely data-driven. With the right metrics and the right technology, a lot of good advertising cost projections and management strategies can be automated to produce a positive effect on any company’s bottom line. That’s the promise that Silicon Valley brings to the table. However, citing higher costs and the stronger dollar, Rocket Fuel failed to deliver, and it produced a loss in the current quarter.
It has over 1,100 employees, and its costs are just getting the best of it. So far, the company is expecting revenues in the current quarter of around $57 million to $58 million. Its expected EBITDA loss is around $18 to $19 million. This is way off the analyst consensus projection of an EBITDA loss of $2.9 million. Expect the stock to get hammered even more due to fundamental weakness. The secret to buying the stock, should the thought ever cross your mind, is to get enough information regarding its ability to rein in its costs.