These numbers had to be impressive to justify the 35x forward PE. Hence, Stone Fox unfortunately trimmed a third of our remaining shares in the Growth and Opportunistic Portfolios leaving roughly 50% of the original investment. Considering the stock was up over 100% in both portfolios it was just time to take more profits considering the wide swings in stock trading. Equinix (EQIX) dropped 30% after missing earnings and VMWare (VMW) dropped 7%.
Guidance was for $155-158M with earnings of $.35. Appears they sandbagged on earnings especially considering the crushing numbers in Q3.Operating margins are expected to be flat, but that's likely low as well. Growth like that typically produces higher margins.
RVBD is by the leader in WAN Optimization now with 40% of the market. If I understood the conference call correctly, 2nd place Cisco Systems is now 29%. Following this trend will be interesting as typically in the tech space when a product becomes the leader in a sector it tends to grab 80% of the market. Everybody typically wants the leading product.
They also announced a 2 for 1 stock split effective 11/1/10. While not really a meaningful transaction, it might help pop the stock short term. Would prefer they not make this move unless the stock really got into the $60+ range. Stocks above $20-30 tend to appear strong then ones that slip back into the teens. Ultimately it doesn't matter but its all a mind game in the stock market.
Price action will be interesting tomorrow. Blowout numbers will undoubtedly lead to much higher prices by the time RVBD reports Q4 numbers in 3 months. Tomorrow though could be impacted if insane traders try to work the limited earnings bump from Q3 to Q4.
Q3’10 Financial Highlights
- Total revenue increased 17% sequentially and 45% year-over-year
- Product revenue increased 22% sequentially and 48% year-over-year
- Non-GAAP operating profit increased 36% sequentially and 84% year-over-year
- Non-GAAP operating margin increased to 28.1% compared to 24.2% in Q2’10 and 22.0% in Q3’09
- Days sales outstanding decreased to 27 days from 32 days in Q2’10 and 42 days in Q3’09
- Cash and investments grew to $469 million compared to $422 million in Q2’10 and $297 million in Q3’09
Disclosure: Long RVBD