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.