CommVault's Earnings Will Move The Shares

Jul.29.13 | About: CommVault Systems, (CVLT)

Data is the "lifeblood" of any organization, and it must be protected and archived. CommVault's (NASDAQ:CVLT) Simpana 10 takes an "exponential leap forward" in providing that protection to thousands of companies in all types of industries. There are currently over 16,000 companies that use this software. Two years ago I wrote an article about CommVault, questioning the fact that the stock had been going up in value since its IPO September 22, 2006 for $16.00 a share. Could it keep going up at the same rate? At the time there was no reason to think the trend would not continue. And now its upward pattern has shown no mercy to any unsuspecting shorts. It is any long term investor's dream scenario:Chart forCommVault Systems, Inc. (<a href=

When the stock is compared to the other major market indices, it is up over 400% in five years:Chart forCommVault Systems, Inc. (<a href=

Believe it or not there has been a lot of short interest over the last year. According to NASDAQ.com it will take five days to cover the 1.85 million shares that have been shorted. But that is better than last August when it would have taken shorts 9 days to cover:

Settlement Date Short Interest Avg Daily Share Volume Days To Cover
7/15/2013 1,851,773 386,035 4.796904
6/28/2013 1,723,897 608,575 2.832678
6/14/2013 1,547,548 399,661 3.872152
5/31/2013 1,497,843 561,629 2.666962
5/15/2013 1,569,317 787,526 1.992718
4/30/2013 1,574,999 586,911 2.683540
4/15/2013 1,621,553 806,793 2.009875
3/28/2013 1,652,478 478,203 3.455599
3/15/2013 1,950,623 705,776 2.763799
2/28/2013 1,718,415 581,078 2.957288
2/15/2013 1,599,999 1,168,933 1.368769
1/31/2013 1,568,457 781,143 2.007900
1/15/2013 1,793,582 676,444 2.651486
12/31/2012 1,989,671 596,719 3.334352
12/14/2012 2,310,399 393,888 5.865624
11/30/2012 2,513,193 590,862 4.253435
11/15/2012 2,688,691 426,783 6.299902
10/31/2012 2,760,919 712,089 3.877211
10/15/2012 2,904,742 429,805 6.758279
9/28/2012 2,876,662 438,913 6.554060
9/14/2012 3,135,005 574,018 5.461510
8/31/2012 3,133,643 337,216 9.292688
8/15/2012 3,097,237 655,653 4.723897
7/31/2012 2,637,613 754,357 3.496505
7/13/2012 2,471,985 905,908 2.728737
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Past history suggests that it is not wise to short a company that has good products that are in high demand. CommVault's Simpana "Cloud" software is one of the best designed products in the industry, and the company has won numerous awards this year. It was recently ranked #24 on Forbes 2013 List of America's 25 Fastest-Growing Tech Companies:

CommVault was ranked #24 on Forbes 11th annual list of growth kings for 2013. Forbes editors combed more than 2,100 publicly traded technology companies, looking for profitable firms with minimum revenue of $150 million and a minimum market value of $500 million.

CommVault also took home two of Storage Magazine's 2013 awards. Simpana 9 won the Disaster Recovery & Backup Product of the Year, and Simpana 10 was the 1st runner up for Best Product of the Year :

DR & Backup Product of the Year:

Collected by : Massimo Merlo
Winner : Commvault Simpana 9
Runner-up: IBM (NYSE:IBM) - Tivoli Storage manager

According to an article in Investor's Business Daily, Oppenheimer's Discovery Fund looks for companies that do well in revenue and earnings growth. Manager Ronald Zibelli Jr. focuses on great companies like CommVault:

He writes that his focus on high-quality companies provides upside growth potential. It also acts as a shock-absorber in pullbacks. CommVault is up 83% in the past 52 weeks. The company makes backup, recovery, archive and storage management software. It benefits from the Big Data trend, and is seeing strong demand from all regions and channels.

The company will announce its quarterly earnings via a live conference call on Tuesday morning, July 30. The estimates among analysts are within a very tight range. Earnings are projected to be 35 cents a share compared to 30 cents last year for the same time period. And revenue is expected to jump to $132.24 million:

Earnings Est Current Qtr.
Jun 13
Next Qtr.
Sep 13
Current Year
Mar 14
Next Year
Mar 15
Avg. Estimate 0.35 0.39 1.65 1.86
No. of Analysts 18.00 18.00 18.00 18.00
Low Estimate 0.32 0.36 1.60 1.76
High Estimate 0.37 0.42 1.68 1.98
Year Ago EPS 0.30 0.38 1.49 1.65
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Revenue Est Current Qtr.
Jun 13
Next Qtr.
Sep 13
Current Year
Mar 14
Next Year
Mar 15
Avg. Estimate 132.24M 138.79M 575.44M 662.38M
No. of Analysts 17 17 17 17
Low Estimate 130.00M 135.30M 566.57M 639.00M
High Estimate 134.01M 141.00M 585.93M 689.20M
Year Ago Sales 111.27M 118.16M 495.85M 575.44M
Sales Growth (year/est) 18.80% 17.50% 16.10% 15.10%
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The stock closed at $78.56 on Friday, well below the median price target of $86:

Price Target Summary for CommVault:

Mean Target: 83.27
Median Target: 86.00
High Target: 95.00
Low Target: 65.00
No. of Brokers: 15
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Conclusion:

When looking at any stocks right now, we have to consider that this is the "off" season. Many analysts and investors are trying to get in some vacation time before school starts. But it is a perfect time to find stocks that have some upside potential. I agree with Mr. Zibelli (mentioned above). Companies that have good products and are exhibiting growth in earnings and revenue will make the best investments for the long term. I think that CommVault fits this category. The biggest variable is the earnings report on Tuesday. If it's a "miss", it would be a great time to buy. But if it beats expectations, the shares could jump up very fast. Judging by its past history, I do not think it will miss. And any significant gains will send the shares into a short squeeze the first part of August.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.