Mark Gomes'  Instablog

ATTU's Q1 was nothing short of an ugly quarter. My sense is that the surprise drop-off in one partner's revenue was about half of the shortfall, while sales execution represented the other half. I don't see either issue being resolved in Q2.

Looking forward to Q3/4, I sense that the partner revenue issue will be resolved. I would also bet that the slowdown at EMC will resolve itself in short order, as this relationship makes a lot of sense for both sides. As for the direct sales execution, I have to think it will take until Q4 for that to be resolved. Things like that don't get fixed overnight.

The new partner win and renegotiated contract were both positive, though I wonder about the motivations behind the renegotiated terms in light of the fall-off in royalty revenues.

Market-wise, our research shows that demand is there and ATTU offers the best solution among independent providers. They just need the execution to match (easier said that done). Based on the commentary and guidance, Mr. Alon must feel confident about exiting 2013 on a 30% growth rate. That would be in-line with market growth figures.

Clearly, this quarter casts doubts on the company's credibility and ability to execute. As we now see, Alon's responses to my grilling on last quarter's call was certainly a sign of things to come. This is why I shifted the stock from Great Find to Wait Time. Specifically, the hype had/has peaked and now have to deliver.

All said, ATTU got a nice bounce on the new deal and solid guidance. The stock is still a near-double from our initiation point and the company has the right products to generate strong growth. Just remember, the share appreciation represents profits, but also risk (which is augmented by the company's Q1 missteps).

Net-net, the balance of risk and reward seem fairly balanced (essentially a coin flip at present). Thus, the stock will remain rated "Wait Time" until further notice.

Disclosure: I am long ATTU.

Here's the latest update on our Stocks To Triple portfolio (hat tip to our intern Matt). All data is as of April 26th. In an upcoming SeekingAlpha article, we'll provide detailed commentary and why we believe QAD Software (QADA) has the potential to triple.

In the meantime, take note of our "Current Classification" column. It provides our current rating and links to key articles regarding when to take profits. My profile provides all the information you need to track our ratings on an ongoing basis (especially the Stocks To Triple Instruction Manual).

You can also find links to all of our initiation pieces here.

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Poised to Triple Performance

* Our picks have the potential for great gains, but also great losses. Selling losers early is one of the keys to maximizing profits. Thus, we employ a 20% loss-limit (from our initiation price) in our portfolio.

Here's a listing of our past initiation pieces.

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Stocks to Triple: Initiation Pieces