EXDS ($33 from $36) shares drop despite strong Q3
Company's sequential revenue growth of 28% disappoints
By Myra P. Saefong, CBS.MarketWatch.com
Last Update: 4:20 PM ET Oct 20, 2000 NewsWatch
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SANTA CLARA (CBS.MW) -- Shares of Exodus Communications fell 12 percent Friday after the company posted a smaller-than-expected loss for its third quarter, but disappointed some investors with only a 28 percent sequential revenue growth.
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Updated:
10/20/2000 5:14:10 PM ET
Late Thursday, the Internet hosting provider (EXDS: news, msgs) said its third-quarter loss was $60.6 million, or 14 cents per share, compared to a loss of $31.5 million, or 9 cents per share a year earlier.
Thirty-five analysts surveyed by First Call expected the company to lose 18 cents for the quarter, on average.
Ellen Hancock, chief executive of Exodus, said the company continued to see strong customer demand for its core complex Web hosting and managed services business during the third quarter.
However, third-quarter revenue was pegged at $229.6 million, up 238 percent from the year-ago period.
Although the revenue beat out the $223.6 million and $220 million estimates from Legg Mason and Epoch Partners, respectively, quarter-over-quarter growth came in lower than expected at 28 percent.
Shares of Exodus fell $4.60 to close at $33.56 on Friday.
"The commensurate revenue acceleration to which investors have become accustomed did not surface during this quarter," said a research note from Mark Langner, an analyst at Epoch Partners.
Langner emphasized that "the news is not all bad" and that Exodus delivered a "solid report." He maintains a short-term positive outlook, "with healthy reservations" on the stock as it heads deeper into 2001.
Solid quarter
Todd Weller of Legg Mason agreed that some investors may have been disappointed by the sequential revenue growth, but "looking deeper evidences a very solid quarter with strong performance across key metrics, led by a large shift to enterprise business mix," he said in a note.
As a result, Weller, who reiterated his "strong buy" rating on Exodus' stock, raised his fourth-quarter and 2000 revenue estimates to $277.3 million and $820.7 million from $268.1 million and $805.5 million, respectively.
He also reduced his fourth-quarter loss-per-share estimate to 15 cents from 18 cents to "reflect increasing mix of higher-margin managed services and larger deal sizes from enterprise customers."
Analysts expect a loss of 18 cents for Q4 on average, according to a First Call poll.
Company outlook
Exodus expects fourth-quarter revenue to be in the range of $270 million to $280 million and said losses for the quarter, excluding goodwill, would likely be $60 million to $70 million, or 15 cents per share, plus or minus 1 cent per share.
Exodus also announced plans to offer a "Managed Web Hosting and Web Application Management" services to better meet the hosting market's evolving needs and extend its current custom managed products.
Langner questions whether Exodus will be able to compete with more focused providers for these services, while Weller said the offering is a positive step toward developing its managed services capability. |
