The Art of Conservative Guidance

 | Oct 30, 2013 | 7:00 PM EDT
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We never want to be too critical of conservative guidance. Nor do we want to panic on it. We can grapple with Facebook's (FB) view of the future, question whether LinkedIn (LNKD) is really seeing a deceleration and wonder whether Yelp (YELP) has already played out its string.

Or we can just say, hey, they want a little breathing room here, and who can blame them?

All three of these companies posted amazing revenue gains. People own the stocks for revenue growth, not earnings. But the same people who own these stocks want to hear only one thing when they get right to the end of the management text, before the Q&A: "We are taking up estimates for sales and earnings to above the range of where the Street is."

When you own stocks for revenue growth and management doesn't do something like that, then you are going to have a tough run. The goal is to figure out who is really seeing a deceleration, as opposed to who is just sandbagging.

I think all three of these are sandbagging, which is why I remain positive on all three, although I recognize that now you have to wait until much closer to the next quarter before you can truly get excited again, unless we get a material change to the positive intra-quarter, either through an analyst meeting or an acquisition.

Plus, it doesn't help that the market doesn't feel right, kind of exactly how the Fibonacci Queen said it might feel, like a price break that's not done yet. Wait for the market and the stocks to settle down if you agree with me that these companies are sandbagging, but understand that there is no hurry to buy Linkedin, that Facebook had an amazing quarter -- full details coming from Stephanie for Action Alerts PLUS people -- and that Yelp is a buy only on the secondary, provided it is done at a discount to the last sale. 

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