Why Shares of Phoenix New Media Ltd. Rocketed Higher Today

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What happened

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Shares of Chinese media company Phoenix New Media Ltd. (NYSE: FENG) soared on Wednesday following a strong second-quarter report. Phoenix beat analyst estimates across the board, and its third-quarter revenue guidance was also higher than expected. The stock finished the day up 37.6%.

So what

Phoenix reported second-quarter revenue of $58 million, up 12.3% year over year and about $1.5 million above the average analyst estimate. Net advertising revenue rose 14% year over year to $50 million, driven primarily by a 66% surge in mobile advertising revenue. This growth was partially offset by a 21.2% decline in PC advertising revenue.

Phoenix co-president Ya Li talked up the company's progress in performance-based advertising:

By leveraging our strong content production capability and expertise in native marketing solutions, we acquired about 20 renowned brand advertisers during the second quarter at some highly visible events and projects, including the Belt and Road Forum, Davos World Economic Forum and the BRICs Forum. Meanwhile, we officially launched a new version of performance-based advertising platform, Fengyu, in the second quarter. Driven by this powerful new platform, our performance-based advertising experienced a robust 104% year-over-year growth in the second quarter.

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Non-GAAP EPS came in at $0.06, up from roughly breakeven in the prior-year period and $0.09 higher than analyst expectations. Higher revenue and an increase in gross margin more than offset higher sales and marketing expenses, leading to the earnings surge.

Now what

For the third quarter, Phoenix expects revenue to come in between $59.3 million and $61.6 million, above the average analyst estimate of $59 million. The company's growth strategy involves expanding its user base and market share by investing in traffic acquisition, as well as using artificial intelligence and differentiated content offerings to go after various growth opportunities.

While the stock price increased by over a third on Wednesday, shares of Phoenix are still 74% below their all-time high.

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Timothy Green 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.