Fusion-io (FIO) is Lighting Up Wall Street, But a Dark Cloud Looms
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After a ho-hum first day as a public company, June's IPO for Fusion-io (NYSE: FIO) has really raised eyebrows over the past few trading sessions. A stark warning for investors, however, could lie ahead.
After pricing its IPO at $19 and surging upon opening, the stock retraced nearly all it gains and nearly re-tested its IPO price and hit $20.06 on June 16th. However it has been all uphill since. Monday shares are trading up 15% to $33 and the stock is charging ahead to take the second spot in this year's top performing IPOs. Currently it sits at number 3, according to data at StretInsider.com's IPO Insider.
Fusion-io is a next generation storage memory company which decentralizes processing capabilities within a data center. The company counts the two hottest companies in the world, Facebook and Apple, as its two largest customers. Revenue, as would be expected, is ramping.
Fusion-io had sales of $125.52 million for the nine months ended March 31, 2011, up nearly 400% from revenue of $25.29 million for the nine months ended March 31, 2010.
The company's largest client is Facebook, which accounted for approximately 50% of revenue during the nine months ended March 31, 2011. Revenue from Apple, through a reseller, accounted for approximately 20% of sales.
While working with Facebook and Apple are buzzwords investors can hang onto, things may not be all they are cracked up to be.
In a serious warning included in the IPO prospectus, Fusion-io said the company expects revenue from sales to Facebook to decline significantly for the three months ending June 30, 2011 as it completes its planned deployments.
Investors need to ask themselves what this "significant decline" in revenue from Facebook will mean and if this lost revenue can be recouped in the future. Based on the about noted sales figures, the roughly $60 million in nine-month Facebook sales could be at risk.
Fusion-io said quarterly revenue and operating results are likely to fluctuate in the future and will be difficult to estimate. The company also said it expects sales to a small number of customers to continue for the foreseeable future. These are clear warning signs for investors. Basically Fusion-io is telling investors results over the near-term will be choppy and as a result investors can expect the stock to be volatile.
So while Fusion-io is the latest hot stock - Caveat emptor.
After pricing its IPO at $19 and surging upon opening, the stock retraced nearly all it gains and nearly re-tested its IPO price and hit $20.06 on June 16th. However it has been all uphill since. Monday shares are trading up 15% to $33 and the stock is charging ahead to take the second spot in this year's top performing IPOs. Currently it sits at number 3, according to data at StretInsider.com's IPO Insider.
Fusion-io is a next generation storage memory company which decentralizes processing capabilities within a data center. The company counts the two hottest companies in the world, Facebook and Apple, as its two largest customers. Revenue, as would be expected, is ramping.
Fusion-io had sales of $125.52 million for the nine months ended March 31, 2011, up nearly 400% from revenue of $25.29 million for the nine months ended March 31, 2010.
The company's largest client is Facebook, which accounted for approximately 50% of revenue during the nine months ended March 31, 2011. Revenue from Apple, through a reseller, accounted for approximately 20% of sales.
While working with Facebook and Apple are buzzwords investors can hang onto, things may not be all they are cracked up to be.
In a serious warning included in the IPO prospectus, Fusion-io said the company expects revenue from sales to Facebook to decline significantly for the three months ending June 30, 2011 as it completes its planned deployments.
Investors need to ask themselves what this "significant decline" in revenue from Facebook will mean and if this lost revenue can be recouped in the future. Based on the about noted sales figures, the roughly $60 million in nine-month Facebook sales could be at risk.
Fusion-io said quarterly revenue and operating results are likely to fluctuate in the future and will be difficult to estimate. The company also said it expects sales to a small number of customers to continue for the foreseeable future. These are clear warning signs for investors. Basically Fusion-io is telling investors results over the near-term will be choppy and as a result investors can expect the stock to be volatile.
So while Fusion-io is the latest hot stock - Caveat emptor.
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