Expensive stocks have expensive swings. That's the takeaway for Riverbed Technology
The WAN optimizer's shares are lighter by as much as 23% as of this writing. What was Riverbed's egregious offense? Were its fourth-quarter and full-year results bad enough to warrant it losing over a fifth of its value?
Sales rose 23% to $203 million, while non-GAAP net income added up to $41 million, or $0.25 per share. That's a jump of 32% over last year's $0.19-per-share profit. For the full year 2011, revenue finished at $726 million, a 32% gain, with earnings of $0.90 per share, a 53% jump. The quarter's results topped what the Street was looking for, which was $200.8 million in sales and a $0.24-per-share profit.
Those figures all sound fine and dandy to me. CEO Jerry Kennelly added, "We believe we are in the strongest strategic and competitive position in our history. Adding to that, early in 2012 we will be entering what we believe will be Riverbed's most exciting and important product cycle yet."
So where's all this pessimism coming from? Guidance.
First-quarter revenue is expected to be in the range of $183 million to $187 million, yielding earnings per share of between $0.19 and $0.21. Those digits are shy of the consensus estimates of $197.1 million and $0.25 per share, respectively. Expectations aside, the guidance midpoints are $185 million and $0.20 per share, which would represent year-over-year growth of 13% and 0% over 2011's first quarter.
The prospect of slowing growth is what's spooking investors, since shares were trading near 88 times earnings. That's an expensive stock that needs to keep growth up to keep shareholders happy.
The Europe, Middle East, and Africa geography jumped 36%, a healthy sign considering that region weighed on results a couple of quarters ago. After going away last quarter, the bears are seeing an invite back into town.
Contrast the numbers to rival F5 Networks
Slowing growth is never encouraging, but Riverbed was recently named a leader in WAN optimization by Gartner, a title it also earned last year. WAN optimization continues to gain momentum as businesses realize the IT savings it can provide, and despite today's drop, I'm still looking forward to the long haul.
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