Friday, October 22, 2010

Riverbed Technology (RVBD) Crushes Estimates; Announces 2:1 Stock Split

Normally I cut back positions ahead of earnings but every so often I take a walk on the 'wild' side and stay 'all in'.  Since I have sold just about all of the 'cloud' (and cloud "me too") stocks, I decided to just hold all of the one we have remaining.  Let me be clear - Riverbed Technology (RVBD) is not really a cloud stock (they just announced their first cloud initiative last quarter), but I am not going to argue with a room full of hopped up bulls.   What do I know - I've only been following the stock for half a decade.  If Wide Area Network optimization is the new cloud so be it - double the valuation.

Riverbed beat estimates by 7 cents (34c v 27c) - revenue came in +13M (148m v 135m).  Gross margin 74.5%.  They announced a 2:1 split.    And now 1/5th of their revenue comes from the most predictable source in the country - government.  Thank you taxpayer - good stuff all around.

For the year the $1.02 estimate immediately goes up to $1.09 with a quarter (estimated at 30 cents to go).   That 30c in Q4 is based on $145M in revenue so based on Riverbed's guidance of $155-$158M obviously a number closer to 37 cents will be in order.  (the company forecasts 35c)  So that adds another 7 cents to the year - taking us to $1.16 forecasted EPS for 2010.  The stock is up 8% in premarket to just over $49; so we're looking at forward PE of 42 based on my back of envelope figures.  Certainly not cheap by any means, but if we're headed back to NASDAQ 1999 PE multiples via Fed printing, PE is only limited by the amount of money our central bank prints.  The stock is up 50% in the last 90 days - let's keep it going, anyone for another 50% in the next 90?

Unlike the other cloud network plays, this stock actually has not suffered technical deterioration over the past few weeks.

[Full report here]

Via Reuters:
  • Network equipment maker Riverbed Technology (RVBD) posted third-quarter results above market estimates on strong sales of network optimization products, and projected a strong fourth quarter, sending its shares up 9 percent after the bell.
  • Riverbed, which supplies software and hardware that enable high speed data transfer on closed networks, said it expects to report fourth-quarter revenue of $155-$158 million, with government contracts expected to rise.  For the fourth quarter, the company expects to earn 35 cents a share, excluding items.  Analysts are expecting the company to earn 30 cents a share on revenue of $146.1 million in the period.
  • The company, posted third-quarter adjusted earnings of 34 cents a share, which compares with market expectations of 28 cents a share.
  • Revenue rose 45 percent to $147.8 million in the period. Product revenue rose 48 percent, while support and services revenue grew 38 percent.
  • During the third quarter, 21 percent of the company's product revenue came from government contracts.
  • The company additionally announced a 2-for-1 stock split in the form of a stock dividend.

Long Riverbed Technology in fund; no personal position


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