We began last week with a big disappointment from Big Blue, IBM (NYSE: IBM), and ended it with a big surprise from Internet industry leader Google (Nasdaq: GOOG), which pulled Nasdaq upward by more than 3% for the week.
A contributor to the week's strong rally was a traditional industry leader, General Electric (NYSE: GE), which published better-than-expected results on Friday. Meanwhile, at the last minute, the politicians also raised the US debt ceiling, to investors' cheers.
The Nasdaq Composite Index is nearing 4,000 points, and here and there worries about Internet bubbles are appearing. We're not talking about Google, which even at $1,000 per share, is traded at a p/e ratio (19) for the coming year that is lower than its annual growth rate of 20%. On the other hand, I believe that Facebook (Nasdaq: FB), which has reached half the market cap of GE, and LinkedIn (Nasdaq: LNKD), which is traded at a higher market cap than Hewlett Packard (NYSE: HPQ), are in bubble territory, unless their results later this month amaze investors.
The company that truly amazed investors last week was SanDisk Corporation (Nasdaq:SNDK), which reported higher-than-expected earnings per share for the third quarter of 2013. With a tail wind from short sellers, who rushed to close positions, the share price broke a multiyear high to approach $70. Its main growth engine is solid state drives (SSD), which already account for 20% of sales; in other words, SanDisk will have more than $1 billion in sales of flash drives for computers this year, compared with negligible sales just a few years ago.
SSD, as well as the proprietary storage solutions embedded in smartphones and tablets, are distancing SanDisk from the stigma of being a "commodities" chipmaker, from which it has suffered for many years. Credit Suisse's analysts were right when in the preceding quarter they announced the turnaround at SanDisk. "This time it's different… It's really different," they said, and gave the company a "Strong buy" recommendation.
In contrast, it is quite amazing to see leading analysts from Goldman Sachs, Morgan Stanley, JPMorgan, Nomura, and Deutsche Bank advising their clients to sit on the fence, reiterating their "Neutral" recommendations. Hats should be doffed before SanDisk CEO Sanjay Mehrotra, who stepped into the big shoes of Dr. Eli Harari three years ago, and who has boosted the company's market cap by 40% from what it was when he received it, and the end is not in sight.
Check Point Software Technologies Ltd. (Nasdaq: CHKP) opens the reporting season by Israeli companies today. Among the companies in my portfolio, ClickSoftware Technologies Ltd. (Nasdaq: CKSW) and Mellanox Technologies Ltd. (Nasdaq:MLNX) will publish their financials on Wednesday, and Radware Ltd. (Nasdaq:RDWR) and Attunity Inc. (Nasdaq: ATTU) will publish their financials on Thursday.
ClickSoftware has already warned for the third quarter, and investors will focus on the company's new full-year guidance. The guidance will make it more or less possible to estimate when cloud contracts will reach the critical mass that will renew the company's growth.
Meanwhile, Wall Street activism has reached ClickSoftware, because of its low price. After the markets closed on Friday, The Discovery Group Holdings LLC, which is also active at Given Imaging Ltd. (Nasdaq: GIVN; TASE: GIVN), filed a 13D Form stating that it had acquired more than 5% of ClickSoftware, which means that it is an active investor, and not just a financial investor. Among other things, this means that The Discovery Group might seek the sale of the company through talks with the board and/or other investors. ClickSoftware, in addition to the family of founder and CEO Dr. Moshe BenBassat, which owns a 12% stake, has two other large shareholders: FMR LLC (Fidelity), and Soros Fund Management LLC, with 10% each.
As I've recently written, I'm optimistic about Mellanox's results and guidance for two reasons: it still has no real competitors in the technology performance test; and, on other hand, its potential customers cannot but invest over time if they want to survive in the heavy computing, cloud, and big data niches, which require the best performance available. All the Googles and Facebooks, which have become so expensive on Wall Street, know very well that they earn their living from the fast and efficient handling of oceans of data entering and leaving them every day.
The most fascinating results this week will be from tiny Attunity, which recently crossed the $110 million market cap threshold without any important announcements. This is double its market cap in June, and more than 25 times (adjusted for the share split) of its nadir of near bankruptcy in mid-2009.
The movement in Attunity's share in recent months cannot but imply very strong results, after a long period in which CEO Shimon Alon laid the groundwork of cooperation and/or OEM agreements with giant companies in some fields in which Mellanox does business.
Published by Globes [online], Israel business news - www.globes-online.com - on October 21, 2013
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