SAN FRANCISCO -- As traders were rejecting most stocks on Friday, NetSuite (N) received a thumbs down for its 2008 projections offered late Thursday.
The stock was off $1.88, or 8%, to $21.61 in recent trading.
After a solid December quarter, the company
projected 2008 revenue growth of 41% to 44%, or $153 million to $156 million, a drop from 61.5% growth in 2007.
The company's guidance was only in line with analysts' estimates. "If this were a conventional software vendor, the stock would be responding favorably today," says Benchmark Capital analyst Mark Schappel.
NetSuite had been trading "at a stratospheric revenue multiple," Schappel says. Following the excitement of NetSuite's December IPO, when the stock gained 36.5% in its first trading day, "people are looking for more upside in both the earnings and the guidance" than the company projected for 2008. Benchmark does not make a market in NetSuite.
San Mateo, Calif.-based NetSuite sells software modules that are used in conjunction with its hosted subscription software to manage businesses.
NetSuite targets growing small businesses that rely on
QuickBooks software. But the company also goes after
customers using Great Plains software, CEO Zach Nelson said on the conference call.
While NetSuite appears expensive on a near-term basis, JMP Securities values the stock based on the company's longer-term opportunity, analyst Patrick Walravens wrote Friday, reiterating his $32 price target. Walravens projects that by 2012, NetSuite will capture 12,500 customers, up from 5,600 today, which will pay double the current average of $20,000 a year, or $500 million in revenue. JMP makes a market in shares of the firm.