Why Websense Shares Bounced
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Websense were looking sensible today, jumping as much as 17% after beating earnings estimates in its quarterly report.
So what: The online security-solutions providers said that revenue actually declined slightly in the quarter, falling 1.8%, though gross billings, a leading indicator for revenues, climbed 1.5% to a first-quarter record $81.8 million. More importantly, adjusted earnings of $0.20 topped analyst estimates at $0.17, though that was down from $0.36 a year ago, as Websense had additional operating expenses related to expanding its sales force. CEO John McCormack noted the strength of the company's Triton solutions, which grew 11.6% and represented a majority of billings.
Now what: There were some positive signs in this report, including the earnings beat, growth in Triton revenue, and a 19% increase in transactions over $100,000. Still, revenue slid, and Websense's outlook was in line with analyst estimates, meaning that the bulk of today's gain seems to have come from just a $0.03 earnings beat. Some investors seem to believe Websense could be an acquisition target, but with a forward P/E of more than 20 and declining sales, the price could be a little high now.
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