What happens when a high-multiple and high-beta stock that has been a high-flyer misses or pre-announces light earnings and revenues? They get crushed. Note Rackable Systems (RACK).
Rackable came clean and is projecting a loss of $683,000 to a profit of $194,000, or a loss of 2 cents per share to a profit of a penny per share. Rackable Systems expects quarterly revenue to range from $105.5 million to $106.8 million. Excluding certain expenses, the company expects $4.8 million to $5.3 million in net income, or earnings of $0.17 to $0.18.
Analysts were looking for a higher profit of $0.27 on $106.1 million in revenue. The company said its earnings and gross margins were hurt by higher-than-anticipated DDR (double data rate) memory pricing, lower-than-expected sales of RapidScale products and more aggressive pricing on some of its contracts due to increased competition.
RACK shares are down 32% at $21.92 in after-hours, and that is after a 2.5% rise to $32.42. Ouch!
Jon C. Ogg