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Why Digital Turbine Stock Jumped Wednesday

What happened

Shares of Digital Turbine (NASDAQ: APPS), a mobile communication software company, jumped 11.4% as of 12:10 p.m. EST on Wednesday.

The sharp increase in Digital Turbine's stock price follows an announcement that the company completed its acquisition of mobile content discovery and advertising platform Mobile Posse.

Image source: Getty Images.

So what

Management believes the strategic acquisition of Mobile Posse diversifies its mobile platform business and creates new growth opportunities for Digital Turbine.

"Mobile Posse has a highly profitable business model with recurring revenue streams and an attractive margin structure," said Digital Turbine CEO Bill Stone in a press release.

Also likely helping Digital Turbine's stock rise on Wednesday was Canaccord analyst Austin Moldow's decision on Wednesday to increase his 12-month price target on the stock to $12, up from $8. He cited the impact of the acquisition on financials for his increased optimism.

Now what

The acquisition will be immediately accretive to Digital Turbine. The company raised its guidance for its fiscal fourth quarter, guiding for revenue between $37.6 million and $39.2 million. This compares to previous guidance for revenue between $33.2 million and $34.5 million. Management additionally forecast adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the period to be between $4.5 million and $5.0 million, up from a previous outlook for $3.5 million to $4.0 million.

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