Cramer: The World Hates Tech Right Now

 | Dec 02, 2016 | 6:47 AM EST
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Are we having another LinkedIn (LNKD) /Tableau Software (DATA) moment?

That's all I could think about when I listened to Workday's CEO Aneel Bhusri drop a bomb on his earnings call about deals that have slipped amid global uncertainty.

If you recall, back in February of this year LinkedIn and Tableau Data, two cloud-based software companies that are fellow travelers with Workday (WDAY) , simultaneously announced that they saw some weakness and uncertainty in their businesses; it caused a tsunami of tech selling that reached far beyond the borders of those two companies.

Workday's comments conceivably could set off a similar flood of selling, as the company very pointedly made clear that the uncertainty is palpable and hasn't yet gone away.

Here's the specific comments by Aneel Bhusri at the end of his prepared remarks, which are causing the stock to roll over: "one recent development worth mentioning is a slippage of some large deals early in Q4 -- specifically, we have seen a few multinational prospects delay their projects." Bhusri went on to say: "Some attribute the delate to global uncertainties such as Brexit, the U.S. presidential election and pending elections in other G8 Countries. We suspect and hope these are isolated events that will be short-lived, but felt it was noteworthy enough to mention on this call."


Now, let's put this into the right context. Unlike Tableau Data and LinkedIn, Workday reported a terrific quarter and didn't cut guidance, although bullish analysts did have to bring numbers down for the next quarter. It did have a surprise profit. The revenue is growing at 34% and remains dynamic, with subscription growth at 38% with improving margins.

That's a far cry from the chatter on Tableau Data's nasty call back in February, when the company dramatically lowered its growth rate, citing cheaper competition and also cut its forecast from a $0.06 gain to an $0.08 to $0.12 loss.

It's also a more positive message than LinkedIn sent back in February, as the social networker took its forecast down for the next quarter from $867 million to $820 million and said it saw weakness in its core marketing and advertising markets.

Still, you could see how someone might panic and sell Workday's stock after hearing those words, especially because it is an expensive stock, with an enterprise value-to-sales ratio of 8.7 -- one of the highest of all companies that I follow.

Again, it shouldn't be as severe as LinkedIn, which saw its stock plunge from $192 to $108 after its comments or Tableau Data's stock, which was eviscerated, diving from $81 to $41 in that same awful February 4 session.

It is worth noting that in the wake of the declines that February day, Workday's stock fell from $64 to $54 and then to $48 the next session. So it's easy to see why this stock could go down more, as it is in the blast zone and not some collateral damage site. A host of cloud companies that looked like LinkedIn and Tableau Data, such as (CRM) , ServiceNow (NOW) , Splunk (SPLK) and Action Alerts PLUS charity portfolio name Adobe (ADBE) saw similar declines.

For a cloud benchmark, though, Salesforce's stock fell from $67 to $58 on the day LinkedIn and Tableau Data blew up, then settled at $54 the next day. ServiceNow fell from $58 to $52 to $46; Splunk got crushed, dropping from $47 to $36 to $31 and Adobe plummeted from $86 to $79 to $74 during those horrible days.

It turned out, by the way, to be a terrific buying opportunity for all but Tableau Data, which still meanders three bucks above where it bottomed. It was a fabulous time to plunge into LinkedIn; four months later, Microsoft (MSFT) bid $196 for the company, a 50% premium.

Later, we even found out that Salesforce used the weakness to cast a wide net for possible acquisitions, which included LinkedIn itself. It's also worth pointing out that Qlik (QLIK) , another lookalike, fell from $24 down to $18 after those horrid days but was then acquired by Thomas Bravo, a private equity firm for $30.50 in June. Demandware (DWRE) , still one more fellow traveler, got crushed, going from $44 to $37 on the fated day and then slipped to $27 a few days later before Salesforce went on a shopping spree and picked it up at $75 in June.

These companies' businesses did not share in the issues of LinkedIn or Tableau Data, so the guilt by association was wrong. I am pretty sure that not all of the companies that will go down today share the global concerns of Workday, but the fact that Workday was talking about future deals not closing is anything but reassuring.

Nevertheless, it's important to point out that in none of these cases did it pay to buy the first day after the crash. Three days later, you hit terra firma for most though.

More important? The world hates tech right now. Workday's just one more reason to hate it.

Perhaps that, more than anything else, is the true takeaway. Oh, and that if you wait long enough maybe private equity and Salesforce scoop you up at the lows. But that could be both wishful thinking and a far way's away before it happens ... if it happens at all.

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