Spy,
Just a couple of thoughts since you've been such a help. Two things you should consider on the fundamental side as you make your decisions on your BEAS short with regards to management's comments.
BEA Systems, as an enabling software platform, has adopted an 'opposite' software business model than a traditional application software business model. By that, I mean to say that BEA Systems sales are front end loaded and all the sales take place in the first days of the quarter as opposed to the application software vendors who are 'back end' loaded and a vast majority of sales occur at the end of the quarter. Management was quite clear when they changed their business model a couple of years ago to be a front end loaded company.
Hence, BEA Systems has already booked their quarter's revenues and the backlog for next quarter is healthy and growing according to management's guidance. That's why it doesn't matter if their quarter ends on April 30th - they've already booked the cash. I have to assume this is why management is pounding the table against all the 'walls of worry' in the media and sentiment. Hey - somebody has got to do it. I imagine those that can pound the table will start to be pretty vocal about it and eventually create a nice little rubber band snap against the wall of worry. Now, that doesn't mean there might be a lag effect with BEA Systems hitting some slowing growth in the next quarter or two, but at least management is saying this quarter is dandy and next quarter's bookings are leading to similar thoughts.
Yet - we've heard that song and dance from management in Q3 and Q4 of many technology companies. So, one just has to wait and see what unfolds. It's quite possible that the demand and need for eBusiness operating system platforms is in such strong growth that it has become a need - regardless of the economy. We saw this with Cisco's products in 1990-1991 when they produced tremendous growth right through the recession. Growth of over 100% because the demand of enterprise routers was so strong that IT departments were tossing budget dollars at the equipment to fix a mission critical process. So, it is something to watch closely and not take for granted in either direction at the moment. Hey, I would love to pick up some shares in the teens, but I would never presume to be able to snag an exact bottom.
The other thing you keep referring to is the TTM P/E ratio. That's only one metric and all decisions shouldn't be made upon a trailing TTM P/E ratio unless you know and are comfortable enough with exactly what went into that BEAS calculation and why the P/E is 500+. Estimated EPS for the full fiscal year is .43 cents giving BEA Systems a forward P/E ratio of 47.8 based on yesterday's closing price of $20 and change. The PEG is around 1.17 and the most recent revisions by analysts in the past week, month and 3 months have been to the upside. This at a time when the majority of revisions in technology have been in the other direction. TTM revenue growth of 77%, 5 year annualized revenue growth of 178%, estimated growth in earnings for one year of 150%, etc... .
Considering other high fliers have fallen to PEG's below .6 and below .5 as well as estimated PE's falling to the 20's and 30's, one could make the argument "If they did, then so must BEA", but it will all unfold as we go forward.
Besides, I've heard pajama parties are fun....
BB |
