Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Violin Memory, (NYSE:VMEM) plunged 48% Friday after the high-speed data storage specialist came up well short of analysts' estimates with its first quarterly report as a public company.
So what: Quarterly revenue rose 37% year over year to $28.3 million, which translated to an adjusted net loss of $25.4 million, or $0.63 per share. By way of comparison, in the same quarter last year, the company recorded a net loss of $21.3 million, or $1.50 per share.
By contrast, analysts were looking for an adjusted net loss of just $0.44 per share on sales of $31.7 million.
Worse yet, Violin Memory also forecast fourth-quarter revenue in the range of $30, to $32 million, with non-GAAP gross margin of 53% to 55%, and non-GAAP operating expenses in the range of $39 million to $40 million. Meanwhile, analysts were modeling sales of $43.62 million.
Now what: Remember, on a GAAP basis, the company lost $34.1 million last quarter, and had roughly $134.2 million remaining in cash, equivalents, and short-term investments as of October 31. As a result, while next quarter's projected operating expenses should reflect a solid sequential improvement over Q3's $48.4 million, Violin Memory needs to show investors it can grow sales quickly enough to close the gap before its cash runs out.
Until that happens, and even with shares trading 65% below the company's $9 IPO price and 55% lower than its first-day close, I think investors would be wise to steer clear.
Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.