Tibco Software Falls Victim to Wall Street’s Short-Term Thinking

In less than two weeks, shares of Tibco Software (TIBX) have been decimated, falling from $11.88 on February 18th to $7.00 this morning. Rumors have been swirling that weakness in Europe would lead to a profit shortfall in Q1 2005. Sure enough, TIBX issued a press release last night saying that first quarter sales and earnings per share would likely come in at $100 -$102 million and 4-5 cents, versus prior guidance of $116-$120 million and 8 cents.

Tibco shares had been one of the few bright spots in the software sector in 2004. The shares soared from under $6.00 last August to hit a high of $13.50 in December. Not surprisingly, with such enthusiasm for the company heading into 2005, this quarter’s miss has caught investors by surprise. Most have chosen to sell.

Wall Street too often focuses on the short-term, and can punish companies (especially those of the small cap technology variety) in extreme ways after an earnings warning. While the Q1 hiccup is undesirable, have the company’s fundamentals gotten so bad that it warrants a $13.50 stock getting cut nearly in half over the course of a couple months? Not in my opinion. There is a ton of stock for sale today. Take advantage of it.

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4 Thoughts on “Tibco Software Falls Victim to Wall Street’s Short-Term Thinking

  1. Anonymous on March 2, 2005 at 12:30 PM said:

    You going to hedge this one like KKD? I don’t really see a downside though; as you indicated, fundamentals are still strong.

  2. Chad Brand on March 4, 2005 at 4:40 PM said:

    Tibco is still profitable and growing. That combined with a great balance sheet gives me no reason to want to hedge a long position in TIBX.

  3. Anonymous on March 10, 2005 at 7:06 PM said:

    Tibco seems to have a lot of customers in the financial industry for their messaging products. According to this article, it seems the financial industry is getting together to create an opensource messaging product:

    Could this be competition for Tibco, and part of the reason for the fall in price?

  4. Chad Brand on March 10, 2005 at 7:18 PM said:

    Messaging really isn’t a focus area for Tibco. They have a lot of financial services customers due to the fact that they once were a subsidiary of Reuters PLC, and since the split they have been trying to branch out. I think the sell-off was completely due to the earnings warning.

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