Why Digital Turbine Stock Is Plummeting Today

Digital Turbine (NASDAQ: APPS) stock is seeing big sell-offs in Tuesday's trading. The advertising technology company's share price was down 17.7% as of 2:45 p.m. ET.

Digital Turbine stock is getting hit hard today following Baidu's recent fourth-quarter report. While Baidu actually delivered sales and earnings for the period that beat Wall Street's expectations, the company reported weakness for its digital advertising businesses.

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Digital Turbine sinks as Baidu's results show weakness in digital ads

Baidu is a leading provider of search engine tools, applications, and digital advertising services in the Chinese market. Accordingly, the company's performance can be a bellwether for other companies in the digital advertising space. Digital Turbine provides a platform for user acquisition and monetization for apps and has significant exposure to the Chinese market, and Baidu's report today could signal headwinds for the business.

Baidu posted a 7% year-over-year decline for its online marketing businesses in the fourth quarter. While some investors had been hoping that the category would see a recovery in the quarter, results actually suggested that the industry backdrop has continued to worsen.

What's next for Digital Turbine?

Earlier this month, Digital Turbine posted results for the third quarter of its current fiscal year -- which ended Dec. 31. Revenue for the period was down 6% year over year to $135 million, but its sales and earnings performance came in significantly better than the market had anticipated and helped power big gains for the stock.

Even with today's big sell-off, Digital Turbine's share price is still up 152% over the last month. While overall revenue declined last quarter, the company noted that it saw performance improve in its Asia Pacific and China geographic segments. With Baidu's recent quarterly report, it looks like that momentum may be in jeopardy. If so, the company's share price could see more significant pullbacks as investors weigh the outlook in China's digital marketing industry.

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Keith Noonan has positions in Baidu. The Motley Fool has positions in and recommends Baidu. The Motley Fool has a disclosure policy.