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Technology Stocks : Wind River going up, up, up!
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To: ANDY DUMAS who wrote (548)2/21/1997 9:34:00 PM
From: Michael Greene   of 10309
 
>> Does this stock tank if the earnings is 1 or 2 cents above expectations?

It seems that any stock that even disappoints a little is summarily executed these days. Would one or two cents OVER the consensus constitute disappointment? Well, my guess is that it would. WIND has been making a habit of beating the estimates and that is now expected and is in the price of the stock. Comments by Ron Abelmann, the CEO, as documented in this thread a few months ago indicated that WIND now has a comfortable backlog and is in the position of being able to pick their numbers and hit them. He said that he expects to be able to show 45 to 50 percent revenue growth going forward. Given that this is a software company this should translate into higher earnings growth. I suspect that any thing less than a 75 percent increase in EPS would be received negatively. A year ago WIND reported 0.13 thus my expectation is 1.75 x 0.13 = 0.23. We need Alan Benn, who is out of the country now, to tell us as he regularly does what the actual number is going to be. I believe that the published consensus estimate is 0.20 for this quarter. The analysts do not want to stick their necks out in writing and are probably whispering a higher number but I am not plugged in enough to know what it is. My real focus is on the revenue number not the EPS. If WIND keeps taking market share this is going to be a very profitable long term holding. An EPS shortfall with 50 percent revenue growth would IMO be a great opportunity for those who have thus far been unwilling to pay up to build a position. However, I doubt that they are going to be so fortunate this quarter.

Regards, Michael
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