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"Shoot first. Shoot everything! That's the market's reaction to Internet backbone F5 Networks' earnings tonight, and I have to tell you that I believe it is a vicious overreaction," Cramer wrote at TheStreet.com shortly after F5’s disappointing report.
A round of applause, please
He’s 100% right. Acme Packet (Nasdaq: APKT ) , already down more than 6% in yesterday’s regular session, fell another 5% in after-hours trading. Rackspace Hosting (NYSE: RAX ) is down more than 10% as of this writing while salesforce.com (NYSE: CRM ) has fallen 7%.
Forget that none of these businesses do what F5 does. Only Acme Packet gets within spitting distance because both companies count telecommunications service providers as customers.
But even here there’s a key difference. F5 makes hardware appliances that specialize in fast data delivery inside a network. Acme Packet’s Session Border Controllers (SBCs) connect networks that wouldn’t otherwise communicate, extending the very reach of the Internet for applications such as Web-based voice calling.
Don’t expect the bears to know or even care about this. Uninformed overreaching happens all the time in tech. Like the jelly of the month club, it’s the gift that keeps on giving ... all year long.
As an industry, tech is filled with nuance. Acme Packet’s SBCs may differ vastly from F5’s appliances, but all traders see is "telecom equipment" and hit the sell button. The panic can last days or even weeks. It’s in that time that bargains get created.
But don’t take my word for it. Rewind to October when everything even remotely related with the term "cloud computing" sold off after datacenter operator Equinix (Nasdaq: EQIX ) reduced its third-quarter and full-year guidance.
Of the stocks that took the biggest beatings back then, unrelated equities such as Rackspace and F5 have rallied the most in the months since. Before today’s sell-off, both stocks were up more than 40% while Internap Network Services (Nasdaq: INAP ) posted gains that exceeded 50%. Nearly every stock on that day’s worst-performer list has gone on to beat the market.
Last night signaled the beginning of yet another opportunity. Acme Packet, Rackspace, and yes, salesforce.com, are taking beatings they don’t deserve. Buy them before they go off sale.
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