This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Fusion-IO Has Growth Potential, But...

NEW YORK ( TheStreet) -- In the ever-changing world of "big data," a market currently dominated by IBM (IBM - Get Report) and EMC (EMC - Get Report), here comes Fusion-IO (FIO), a relatively unknown company that is starting to disrupt the way enterprises think about storage and analytics.

While I do believe the company has incredible growth potential, I worry that macro headwinds may soon add some restraint to the incredibly high expectations its current valuation presumes. While the company deserves credit for having avoided these setbacks up to this point, I think it is prudent for investors to wonder how much longer that can last.

An Impressive First Quarter

For the period ending Sept. 30, the company reported net income of $3.9 million, or 4 cents per share, on revenue of $118.1 million. Sales surged almost 60% year over year and 11% sequentially, while also exceeding analysts' estimates by 7%. Although net income declined from the year-ago quarter, the company continues to do well in terms of profitability. Operating income surged upward by 79%, while gross margins also improve sequentially by two points to 59.5%, beating the company's own projections.

Improvements in margins was attributable to better product mix and cost improvements on its higher-configuration products. Likewise, expenses also showed considerable improvements, declining by 5% sequentially or saving the company slightly over $2 million. As a result, the company was able to generate 19.5% in operating margin.

Similarly, sales and marketing expenses declined during the quarter, coming in at $23 million and shedding almost $2 million sequentially.

Execution such as this would ordinarily be cause for celebration but the company's flat guidance for the second quarter didn't allow that to happen. Disappointment was the immediate reaction by investors. However, flat revenue projections still represent 40% year-over-year growth.

What's more, investors can expect increased revenue to come from some of the Fusion-IO's largest customers, which includes Apple (AAPL), (CRM) and Facebook (FB).

Moving Forward

Overall, this was an exceptional performance across the board although the resulting 14% drop in the stock did not reflect this. Investors decided it was best to take profits now as opposed to waiting for the tough macro-climate, which has hurt rivals such as IBM and EMC, to catch up with Fusion-IO. Nonetheless, the company's performance speaks to the quality of its management as well as its strong fundamentals.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
FIO $0.00 0.00%
EMC $26.11 0.00%
IBM $145.94 0.00%
AAPL $93.74 0.00%
FB $117.58 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs