IT reseller Datalink has been one of the market's strongest performers in 2011, up nearly 100% year-to-date at Friday's close of $9.03. The stock has nearly overcome a steep drop in late September that appeared to be due to stock sales related to a secondary offering in March.
Investors should keep a close eye on Datalink's earnings, reported Wednesday after the bell, as the company has gapped up after each of its last three quarterly reports, blowing away estimates each time. For the third quarter, analysts are estimating earnings of 17 cents per share (non-GAAP) on nearly $88 million in revenue. Both figures are around the midpoint of Datalink's guidance for $85-90 million in sales and non-GAAP earnings of 15 to 19 cents per share.
Datalink certainly looks like a strong buy at current levels; backing at the company's $1.86/share in net cash, its P/E is just over 10 on a trailing basis. Meanwhile, year-over-year revenue growth has been 31% for the first half of 2011, despite comparing against a record 2010. The company's focus on data center solutions puts it at the center of the so-called "cloud computing" movement, as enterprises move from hard drive to virtual storage, creating significant growth opportunities going forward.
Another strong earnings report for DTLK could propel the stock back toward the $11 level it reached in August; anything less may disappoint investors accustomed to the company surpassing not only analyst expectations but its own guidance. Any weakness in the stock post-earnings may provide another buying opportunity for a classic GARP ("growth at a reasonable price") stock."
"Both figures are around the midpoint of Datalink's guidance for $85-90 million in sales and non-GAAP earnings of 15 to 19 cents per share."
Vince missed the revised guidance that was in the PR announcing the Midwave acquisition that moved the midpoint of the revenue and earnings to above the analyst estimates of the day of the announcement:
"The Company expects third quarter 2011 revenues to be in the range of $88 million to $90 million. ... On a non-GAAP basis the company expects earnings per share in the range of $0.17 per share to $0.19 per share."