“We’ve been seeing a pullback among the software names as they had gone up so fast, really straight up in the past three months,” Brian Schwartz, an analyst at Oppenheimer & Co. in San Francisco, said in a telephone interview. “It’s follow-through on the volatility that occurred during the past week, and Ellie Mae reached a 50-day moving average, then pulled back.”
“There may be some misunderstanding as folks try and grasp what the news is, but there is a sustainable recovery in housing,” Schwartz said. He has an outperform rating on the stock, with a target price of $32 a share.
“The growth trajectory is likely to be higher for these software companies than people think. People should look at Ellie Mae as a dominant industry leader with huge market gains still ahead,” Schwartz said. “There are numerous growth opportunities and emerging opportunities, including among the mega banks.”
Ellie Mae, known as a software-as-service company, provides “data quality assurance and complex software in what was a pen- and-paper market,” Schwartz said. Its software offers ways of automating the mortgage process and improving risk management.
“All the mortgage origination data seems to indicate that there is a recovery in the housing market and the demand for their services is increasing, not decreasing,” Schwartz said. Ellie Mae is “the market leader in what they do. They only sell in the U.S. so have no exposure to Europe. The price drop today is a wonderful buying opportunity.”
Hi TDM, I'm not buying any more until the earnings call, and hear what they say about Q4 guidance and 2013 outlook. The chart is broken for now. No rush to buy in my opinion. The recent downside volume is institutions bailing. This is not mom and pop daytrading. ELLI is undergoing turnover in investor base - new institutional support will have to come in and stabalize the stock. I'm not going to step in front of that train. Though a dead cat bounce is due, and hopefully it can tread water up until the earnings report.