Digital Turbine Inc (APPS) shares skyrocketed after hours when the company delivered an updated 2016 guidance. Revenue for 2016 was targeted to the $90-100 million range, lower than the expected $104 million, but still 3X better than 2015’s $28 million. The main reason we saw a drastic change was because the company had to push back the device launches to early 2017 from Q4 of 2016. They will also onboard new distribution partners later in Q4 of 2016. CEO Bill Stone said, “Our updated revenue range for fiscal 2016 reflects recent revisions in timing of DT Ignite™ rollouts with newly added distribution partners.”
Price action on the APPS daily chart shows that the recent bearish trend appears to have made a key bottom yesterday at $1.11. Price is now testing the recent upper boundary of the $1.30 to $2.00 range. If we continue to see bullishness here, we could see price rally towards $2.36, which is the 38.2% Fibonacci retracement of the $4.39 to $1.11 move. Further upside may eventually target the $2.75 to $3.00 zone.
If we see a return of the bearish trend and price returns below the $1.60 support level, price may target the $1.30 region.
The Trade: Buy APPS at $1.75, with a stop loss at $1.50 and a take profit at $2.25. The Risk/Reward Ratio is 1:2