Here's Why Vimeo Stock Absolutely Skyrocketed Today

Shares of video platform Vimeo (NASDAQ: VMEO) absolutely skyrocketed on Tuesday after the company reported financial results for the third quarter of 2024. As of 11:15 a.m. EST, Vimeo stock was up a staggering 42% and hitting its highest price in more than two years.

Was the quarter really that good?

In Q3, Vimeo's revenue was counterintuitively down almost 2% year over year. The company's gross margin was 79%, which was the same as last year. And it had net income of $9 million compared with net income of $8 million in the prior-year period.

These numbers don't jump off the page, but Vimeo's profitability is worth noting. The company has cut expenses, boosting its earnings per share (EPS) and free cash flow to all-time highs. And that's a big deal considering what's happening beneath the surface.

Vimeo's revenue is down, but its enterprise product is growing by leaps and bounds. Bookings for its enterprise platform were up 39% in Q3 and now constitute 25% of overall bookings. In short, the company has turned the corner on profitability, and it has an enterprise product that's high-growth and could carry the business to new highs in coming years.

What about Vimeo stock now?

The other important bit of context here is that Vimeo stock was really cheap leading up to its Q3 report. It traded at just two times its sales and at about 16 times its free cash flow.

VMEO PS Ratio data by YCharts.

For a business in decline, that was probably a fair valuation. But if Vimeo's enterprise-video platform is gaining traction and can keep growing, then the valuation was cheap. Moreover, the valuation could still prove to be cheap even after today's jump.

What matters is whether Vimeo can continue to profitably scale its enterprise platform. If it can, then the stock could have more upside.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $22,050!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $41,999!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $407,440!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of November 4, 2024

Jon Quast 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.