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Is the Meet Group's 12% Sell-Off Overdone?

What happened

Shares of The Meet Group, Inc. (NASDAQ: MEET), a market leader in the mobile meeting space with over 2.5 million daily active users through multiple brands, shed 12% of their value Friday morning as of 11:10 a.m. EDT, after the company released second-quarter results that failed to impress investors and analysts alike.

So what

Strictly glancing at the year-over-year gains and the company's top- and bottom-line results, business appears to be strong. Compared to the prior year, Meet Group's total revenue was up 91%, to $31.3 million, easily topping analysts' estimates of $30.7 million. Its mobile revenue was up 55% to $23.3 million, which is a promising sign for growth. Its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) was up 23% to $7.4 million for a healthy margin of 24%.

Those positive results filtered to the bottom line with adjusted net income rising 37% to $6.6 million, or $0.09 per share, above analysts' estimates calling for $0.07 per share.

And not only are the company's financials strong, but its daily active user count continues to explode:

Image source: The Meet Group Q2 2017 presentation.

Said David Clark, CFO of The Meet Group, in a press release:

We are excited to have closed the acquisition of Ifwe Inc. during the quarter, adding the Tagged and Hi5 mobile apps to our portfolio. We are also thrilled to have completed the launch of livestreaming video on MeetMe. Since the time of our Q1 earnings announcement in May, we have increased daily video minutes 80% to 7.2 million, with more than 20% of our users watching videos every day. We expect to fully launch livestreaming video on Tagged and Skout by the end of this quarter, which we believe will lead to further gains in video engagement.

Image source: Getty Images.

Now what

So with such strong results, why the 12% sell-off Friday? The issue is that management is guiding for 2017 revenue to check in between 1 million and $126 million -- which would be a strong 50% to 66% growth year over year -- and that was seen as disappointing, compared to analysts' estimates calling for $129 million. The guidance reflects management's conservative view on advertising rates and its belief that industry supply has outpaced recent demand, which could curtail revenue over the short term.

In my opinion, with such strong second-quarter results and increasing daily active users, this sell-off seems a bit overdone, especially if you have a long-term mind-set.

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