Why Meet Group Inc. Stock Dove 22 % in August

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What happened

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Shares of Meet Group (NASDAQ: MEET) shed 22% last month, according to data provided by S&P Global Market Intelligence.

The decline has left the volatile stock down more than 20% so far this year, compared to gains of over 10% for the broader market.

So what

The social networking specialist's slump occurred following second-quarter earnings results that paired strong sales gains with a conservative forecast for the rest of the fiscal year. Meet Group's revenue jumped 91% to $31 million, thanks in part to acquisitions. However, average revenue per user dropped for the second straight quarter. 

The company booked most of its growth on mobile devices and also benefited from spiking engagement around rich media -- especially video. "We have increased daily video minutes 80%" since May, Chief Financial Officer David Clark said in a press release, "with more than 20% of our users watching videos every day."

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Now what

The executive team is bullish about the impact that video will have on its business in boosting engagement and delivering more value to advertisers. In addition, Meet Group is rolling out a new gifting functionality that it believes will improve the service for users and for advertisers.

However, citing a flood of advertising supply in the industry, the company issued conservative sales guidance for the full year. That forecast rattled investors, who were hoping to see more progress toward a return to rising average revenue per user. Until Meet Group can demonstrate that consistent growth, the stock is likely to remain volatile.

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