PeopleSoft falls despite strong
quarter
By Tiffany Kary ZDII
PeopleSoft (Nasdaq: PSFT) shed 10 percent
Wednesday, despite praise from some
analysts following the company's report of
better-than-expected fourth quarter.
A bearish report from Morgan Stanley said the
stock was likely to stay stagnant in the
near-term.
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Shares in the maker of enterprise software
were off $5.03 to $43.91 on Wednesday
morning. The stock has risen 31 percent since
the year began.
PeopleSoft announced financial results after
market close Tuesday, beating estimates on
the top and bottom line. The company stuck to
its earlier revenue and earnings forecasts for
2001, perhaps disappointing observers who
were hoping the company would raise
expectations.
First Call consensus currently predicts
PeopleSoft will earn 58 cents per share on
revenue of $2.06 billion.
However, Morgan Stanley analyst Charles E.
Phillips downgraded the stock from
"outperform" to "neutral". Phillips said the
downgrade was based on share price, and an
expectation that revenue growth this year is
unlikely to match the company's impressive
pace of the last six months.
The company's planned reduction in deferred
revenue throughout the year reduces top line
visibility, and "quite possibly, the multiple on
the stock," Phillips said.
The analyst praised management for doing an
excellent job in reviving the company, but said
that in this transition phase, comparisons are
tougher, income from its Momentum subsidiary
is declining, and margins will likely improve
slower than expected.
Other analysts were extremely optimistic on
the stock.
Lehman Brothers analyst Neil Herman
reiterated a "strong buy" rating on the stock,
and upped his target price to $60 from $55 a
share.
"We believe potential investor concerns over
the modest upward revision to EPS guidance
are unwarranted as we believe this cautious
up-tick is a reflection of macro-economic
concerns," the analyst cautioned.
Herman praised the company's strong
demand. He left his already
well-above-consensus earnings estimates for
2001 unchanged, but said he believes
PeopleSoft could top his published
expectations for the next two years.
Goldman Sachs analyst Steven Kahl
maintained a "market outperformer" rating and
raised 2001 estimates slightly. His only caution
was that better visibility was needed on the
higher growth segments to sustain longer term
growth rates.
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