Wait 3 Days Before Trading Salesforce.com: Pro Trader
In the after market, the Fast Money traders were closely looking at the action in Salesforce.com, which popped on better than expected earnings.
Shares gained as much as 10% after the firm’s results showed margins were better than expected and bookings were better than expected.
“All great things until you come to the valuations,” says top trader Guy Adami. “At 83 times earnings you have to ask yourself do you chase this stock?”
In other words, was the quarter strong enough for the stock to trade at an even higher multiple?
Here’s how you tell. Trader Brian Kelly says “wait 3 days and see if the gap higher on Friday holds.”
If it does, then you can assume the market is comfortable with an even higher P/E ratio.
Looking at the numbers a little more closely, the company reported a fourth-quarter profit, excluding certain items, of 43 cents per share, beating the 40 cent average estimate of analysts polled by Thomson Reuters I/B/E/S.
Quarterly revenue rose 38 percent from a year earlier to $632 million, beating the $624 million expected by analysts
Meanwhile the traders were skeptical of Deckers after the latest earnings disappointed the Street.
Although net sales for the quarter grew 40.4 percent to $603.85 million from $430.12 million last year – the pros were much more focused on the company’s forecast.
Looking forward to the first quarter, the company now expects earnings per share to be down about 50 percent over 2011 levels primarily due to the increase in sheepskin costs in 2012 compared to 2011.
“This is a major letdown for people who thought the story would continue,” says trader Tim Seymour
“Rising sheep skin costs,” says a dismayed Karen Finerman. The maker of Uggs is citing higher sheepskin costs as a headwind.
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Trader disclosure: On Feb 23, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Finerman is long AAPL; Finerman is long BAC; Finerman is long JPM; Finerman is long HPQ; Finerman's firm is long AAPL; Finerman's firm is long JPM; Finerman's firm is long HPQ; Finerman's firm is long WMT and short calls; Seymour is long BAC; Seymour is long INTC; Seymour is long CSCO; Adami is long C; Adami is long GS; Adami is long INTC; Adami is long AGU; Adami is long NUE; Adami is long BTU; Adami is long MSFT; Kelly is long TLT; Kelly is long US Treasury bonds
For Shaw Wu
(HPQ): Sterne, Agee & Leach, Inc. makes a market in the shares of the subject company
For Abe Reichental
For Connor Browne
Thornburg Investment Management owns AAPL shares
For Bill Lefkowitz
For Paul Sankey
(OXY): Deutsche Bank and/or its affiliate(s) has received non-investment banking related compensation from this company within the past year. This company has been a client of Deutsche Bank Securities Inc. within the past year, during which time it received non-investment banking securities-related services.
(MPC): Deutsche Bank (and/or affiliates) owns 1% or more of any class of common equity securities of this company and company is an Investment Banking client of DBSI
(COP): Deutsche Bank (and/or affiliates) owns 1% or more of any class of common equity securities of this company. Company an Investment Banking client of DBSI. Deutsche Bank and/or its affiliate(s) has received non-investment banking related compensation from this company within the past year. This company has been a client of Deutsche Bank Securities Inc. within the past year, during which time it received non-investment banking securities-related services.
(SM): Company an Investment Banking client of DBSI
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