Is This the Worst Call I've Ever Made?

Shares of Qlik Technologies (Nasdaq: QLIK  ) fell as much as 14% Friday after reporting worse-than-expected results the night before. The stock is down more than 22% year to date, sharply underperforming the S&P 500 over the same period.

Both revenue and profit came in well below forecasts -- for Qlik, the second time in four quarters:

Metric

Q3 2012 Estimate

Q3 2012 Actual

Q3 2011

YOY Growth

Actual

Adjusted earnings per share

$0.03

$0.02

$0.05

(60%)

Revenue

$88.4 million

$86.1 million

$75.5 million

14%

Source: S&P Capital IQ.

More frustrating than the miss is Qlik's record. Revenue growth has slowed in each of the past five quarters -- from 50.2% in last year's Q3 to 14% this year. Interestingly, gross margin has held steady throughout that period, which suggests Qlik is paying a price for demanding a premium for its wares.

Source: S&P Capital IQ and The Motley Fool.

The good news? Competitors may not be faring much better. MicroStrategy (Nasdaq: MSTR  ) has missed estimates in two of the past four quarters, while Actuate (Nasdaq: BIRT  ) came in light during Q2. More recently, MicroStrategy revealed a management shake-up that raises questions about the company's third-quarter results due on Oct. 29.

And yet MicroStrategy's potential struggles pale in comparison to the real problems facing Qlik, a purported innovator I publicly backed as the best tech stock for 2011. Growth is decelerating exactly when it should be accelerating.

For his part, CEO Lars Bjork cited a "challenging business environment" that made it more difficult to sell to large accounts. Is that a fair excuse? Perhaps. At this point, what matters is that maintenance revenue (i.e., sales of upgrades and support) grew at a currency-adjusted 41%, while license revenue (i.e., sales to new accounts) grew 13% on the same basis. License revenue should be the bigger contributor. Instead, Qlik looks like the Oracle (Nasdaq: ORCL  ) of its industry. The database king derived 51% of revenue from license upgrades and support in the quarter ended on Aug. 31.

A new deal with Teradata (NYSE: TDC  ) for allowing Qlik users to do rapid visual analysis of Big Data may help to reignite growth, but recent history cautions me to presume nothing. I've made a bad call on this stock so far.

My next step is to reach out to business intelligence experts and users and assess the substitutes. Does Qlik still possess the technical advantages I cited when picking the stock for our Motley Fool Rule Breakers service? I'll post what I find out, so stay tuned to Fool.com for updates.

However, you needn't wait on me if you're looking for ways to profit from the Big Data trend. Our tech analysts released a special report that digs deeper into Teradata's risks and opportunities while providing specific guidance on how to profit from rising interest in Big Data tools. Click here to get your copy instantly -- it's free.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Qlik Technologies at the time of publication. Check out Tim's web home, portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool owns shares of Oracle. Motley Fool newsletter services have recommended buying shares of Teradata and Qlik Technologies. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (4) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 01, 2012, at 9:08 PM, leaderoftheback wrote:

    Qlik is over-valued based on what the business is capable of, or it's over-valued because of what management is capable of, or it is over-valued because it's two years young on the market and maybe, just maybe, the company (and underwriters) were a little loose with the truth out of the gate.

    One would have a strong case that the stock is worth a dollar to a dollar and a half based on earnings and growth, and if you are really keen on the product, pay two or two-fifty. That would not seem overly risky. Twenty dollars is risky. That's the only bad part of the call, Tim...valuation and timing...and while the Fool does not advocate trying to time the market, maybe it's worth incorporating a wee bit of timing on IPOs...I'd recommend waiting two full years. I wonder how it would affect the blended RB results (easy enough to test)? You lose on Ancestry.com, you don't lose on ZIP or Qlik. How would that adjustment affect overall RB performance?

  • Report this Comment On November 06, 2012, at 10:18 PM, BillFromNY wrote:

    Maybe not such a poor call initially, but one quarter ago it might have been nice to have been told that revenue growth had declined for the preceding four quarters.

  • Report this Comment On November 06, 2012, at 11:35 PM, Mega wrote:

    "The good news? Competitors may not be faring much better."

    That's not good news!

    "When a good manager meets a bad industry, it's the industry that keeps its reputation." -Warren Buffett

  • Report this Comment On November 06, 2012, at 11:35 PM, Mega wrote:

    (Not that I think Qlik is well managed...)

Add your comment.

DocumentId: 2082335, ~/Articles/ArticleHandler.aspx, 4/17/2014 6:08:01 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 2.54 0.14%
NASD 4,095.52 9.29 0.23%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

4/17/2014 4:00 PM
QLIK $25.48 Up +0.08 +0.31%
Qlik Technologies CAPS Rating: **
TDC $46.99 Down -0.09 -0.19%
Teradata CAPS Rating: ****
BIRT $5.78 Down +0.00 +0.00%
Actuate Corporatio… CAPS Rating: ****
MSTR $104.50 Up +1.66 +1.61%
MicroStrategy, Inc… CAPS Rating: ***
ORCL $40.08 Down -0.05 -0.12%
Oracle Corp. CAPS Rating: ****

Advertisement