I listened to the FreeMarkets call and have seen reports this morning from Goldman, CSFB, Bear Stearns, Hambrecht, and SWS. I'm not selling it, but controversy remains.
All sorts of cross currents some of which are really positive like customer adds (more this quarter than the previous three) increasing margins, but the overall conclusion I reach is that concerns about sourcing volume and product mix/transition issues will keep the stock depressed for a while...until it becomes clearer whether the reduced forward guidance is due to the cycle finally catching up with them in the form of smaller sourcing volumes, or a more fundamental shift to Quicksource from Fullsource.
There is no universal reaction by analysts to the report. It's a real mixed bag. Some are maintaining their buy and strong buy ratings, while others are reducing to market perform, neutral and hold.
FreeMarkets remains the clear leader in eSourcing, gets high marks from its customers for innovation and service, and is faring far better than its competitors. The stock is dirt cheap in my book, considering positive cash earnings, a growth rate of 50% or so even on lowered estimates, no debt and $2.70 per share in cash.
My gut tells me that these issues will be resolved positively, particularly now that the financial markets are turning, which will loosen corporate purse strings. Now it doesn't seem to be whether FreeMarkets continues to gain customers, but whether transaction volume picks up again. |
