A sharp and short-term sell-off following NetSuite's (NYSE:N) earnings report was unjustified, Fool contributor Tim Beyers says in the following video. Originally, the stock fell as much as 8% but the tide has turned since the January 30 release and the stock has pulled back to about even. So why the sell-off? Tim points to one number: 29.
NetSuite announced 29% increase in cash flow from operations. Deferred revenue increased at about the same rate, yet both metrics trailed year-over-year gains in revenue, which was up 35%. The company may be having a tougher time finding customers than in previous quarters.
Fortunately, the story doesn't end there. During a conference call with analysts NetSuite Chief Financial Officer Ronald Gill said that the average deal size increased 20% in 2013, and in Q4, "broke records" for large deals with several more than 100K and 500K. Both good signs, Tim says, even if NetSuite still badly peer Salesforce.com (NYSE:CRM) in this area. Two years ago, CEO Marc Benioff announced his company's first nine-figure deal, and Salesforce's backlog has been growing ever since.
Is one stock better than the other? Not necessarily, Tim says. After all, it's still early in the cloud computing adoption cycle. There's plenty of time for NetSuite, Salesforce, and their peers to grow and take share away from incumbent suppliers of business software.
Now it's your turn to weigh in. What did you think of NetSuite's earnings report? Please watch the video to get Tim's full take and then leave a comment to let us know whether you would buy, sell, or short NetSuite stock at current prices.
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 Netflix and Salesforce.com at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+, Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.
The Motley Fool recommends NetSuite and Salesforce.com. It recommends and owns shares of Amazon.com and Netflix. 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.