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Questor share tip: WANdisco shares slump
The sharp reversal of the shares in this Aim-listed technology company has accelerated from early March, says Questor.
WANdisco
469punch
Questor says HOLD
WANDISCO [LON:WAND] has been one of the major victims of the sell-off in technology companies that has accelerated since the beginning of March.
Shares in the Aim-listed company have tumbled more than 70pc in the past six months from more than £14 to just £4.30 at midday yesterday. It has been a dramatic fall from grace for a company once tipped as the next Facebook or even Google. For investors it provides an excellent example of why they should never stray from the fundamentals.
Arguably, nothing has changed for the Sheffield-based company, which writes computer software that helps companies search though vast amounts of data quickly and easily. With more data about our daily lives being collected all the time, WANdisco’s services are increasingly in demand.
The software company said it continued to win customers for its big data product, with British Gas and University of California Health signing contracts during the three months ended March. WANdisco also renewed existing contracts with HP and Walmart for its ALM product. The company reported bookings up 40pc to $4.2m (£2.5m) in the first quarter ended March, with $200,000 from big data and the $4m balance from ALM bookings. The company has blue-chip clients, such as Nokia, Cisco and Apple.
Although David Richards, chief executive, says the company has a “strong pipeline of potential customers” in big data with good growth from the core ALM business, Questor remains wary.
When others lose their heads it is necessary to stick to the numbers. The software company is still in its infancy and in full-year results for 2013 reported underlying losses had widened to $7.8m, from $3m in the previous year, despite revenue increasing by a third to $8m, from $6m. The cash outflow from operating activities had also increased, to $11.6m from $4.1m. The only thing keeping the company going was the issue of new shares.
The company changed advisers from broker Panmure Gordon to Investec on May 19. This is a worrying sign as Panmure Gordon have been vocal supporters of the stock since its flotation in 2012, so the sudden change is a red flag for investors.
Questor is always wary of technology stories; 2001 lives long in the memory. The last time we looked at the shares we said they were high-risk and we couldn’t recommend them until the company generated more cash. Investor sentiment has now turned savagely against growth tech stocks; until that changes they are no better than a hold.