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IDreamSky Tanks After Revising Q4 Revenue Lower

iDreamsky (NASDAQ:DSKY) absolutely tanked Monday on news it would miss previously announced revenue due to a delayed game launch and another game not living up to earlier expectations. The company also announced a share buyback, a token offering which the market plowed right through as selling intensified. After all of the carnage, the stock closed down more than 33% lower Monday (and another 5.1%, as of midday Tuesday), striking a fresh all-time low of $7.03, a stunning 53% lower than its IPO price. Volume was of course heavy, with about 8x more shares trading hands than the trailing quarterly average. There wasn't any bargain hunting going on, with the stock closing near its lows on the day reached at the end of the session.

But is the stock's recent slide a siren song luring investors toward the rocks or a legitimate buying opportunity?

Of the two items behind the lower revenue guidance, a game launch delay and an underperforming game, the latter sounds more serious than the former. And given the timing of the announcement (well after Q4 ended), it seems that the underperforming game may have been a bigger factor (it's unlikely the company just realized the game launch was delayed). Read more