GST, I disagree. I think the revenue recognition is the
key. If the Q2 projection is still based on the old
recognition model, I would say this is a buying opp
for ARBA right based on the following reasons:
1:) It should not come as a surprise to anyone that
economy is slowing down drastically and this will
affect all companies, all sectors. On the other hand,
the street has largely discounted this slowdown,
evidented by the huge drop on almost all NASDAQ
stock tickers in the past 3 months.
With Fed on the line, ready to aggressively cut
intereste rate, the long term trend for the market
should be up from here.
2:) ARBA is no exception. TRUE, its stock has move up
from low 30 to low 40 before the earning, but it
also dropped from 100 to 30 in 2 months. So, any
reasonable slowdown in its business is largly
discounted.
If in fact, ARBA can deliver higher than anticipated
financial result in Q2 (assume they still use old
model), this stock should be traded around 50 around
Q2 time because part of the 100-30 ride is overdone.
At least we know 30 will be the bottom.
If this assumption is right, buying ARBA at 36 is not
a bad move
3:) However, the key issue here is, what if ARBA uses the
new revenue model to cover up what could be a much
deteriorating business outlook, street is not going
to like this and some may even think 100-30 ride is
not enough.
Just think what would happen if ARBA announced
yesterday that they would generate Q2 revenue in
the 130-140M range? That could be diaster!
Again, I am speculating here but will not touch ARBA shares
until I find the answer to my question. |
