NEW YORK (Real Money) -- When I say, "Supply kills," and you aren't exactly sure what I mean, I should add, "Go Google 'supply of Tableau Software (DATA).'" Here's a company that has done everything right for the growth momentum cohort, not unlike its compadres in crime. The stock had rallied tremendously this year, running from $67 to $102 and peaking in the last week of February, same as all of the other highfliers.
Then it crashed back to Earth, or at least to $55, before the company reported Tuesday night. Once again, as it had always done since coming public a year ago, Tableau delivered the superior growth for which it's been known. Sales grew at more than 80%, and the company struck many huge deals.
Now, in the premarket, it is trading up. Can this move be trusted? Let's look at the history.
The last time Tableau reported a similarly amazing quarter, back on Feb. 4, the stock soared 13% -- from $79 to $89 -- in one session. It kept climbing, too, peaking at $102 near the end of February like just about every other stock in this sector and its close relations. That means cloud computing, software-as-a-service, big data and network security.
So, then, what went wrong? Why didn't it continue? I think that, because the stock got very expensive vs. historical parameters, there was a ton of insider selling after the quarter. Then the company dropped a 4-million-share follow-on offering, pricing the darned thing at $89.35. Yes, supply hit the tape from everywhere, and this just plain overwhelmed demand.
It's really been bombs-away ever since. Tableau's sickening slide has looked like all the others: relentless selling, perhaps spurred by margin calls, then a little lift -- followed by another barrage of selling.
This one barely participated in the post-Yelp (YELP) earnings rally, in part because its cohort of business-intelligence software has been soft of late, even as that's not been the case with Tableau specifically. But Tableau's giant offering really laid to waste all who have tried to catch the bottom here. That huge swath of stock simply couldn't find a home, and the stock's been a hot potato ever since. It didn't help, for certain, that the offering came during the week of March 20, the heaviest week for initial public offerings in seven years.
I have often thought of that offering as a price-discovery event. Look, we knew the stock shouldn't have run all the way up to $102 after that last quarter -- but what was the real price? Where do large sellers and buyers meet? What's it really worth?
Four million shares were priced well off the high, and you tend to think that this is price -- or, if anything, you'd think it's below the real price and that the stock will bounce back up. Nope, the stock traded down to $75 four sessions after that $89-and-change pricing. Straight line.
A few weeks later, it would all be gone and then some: The stock closed Monday off 15% for the year.