Exodus shares slide despite strong 1Q results

Exodus Communications (Nasdaq: EXDS) shares took a pounding Monday, falling 20 7/16, or 19 percent, to 87 1/4 despite posting a smaller-than-expected loss in its first quarter.

Making Monday's sell-off all the more curious is the fact that only one brokerage firm has weighed in on the Exodus situation and it upgraded the stock.

E-Offering analyst Christine Nairne bumped the stock from a "buy" recommendation to a "strong buy" while raising her fiscal 2000 estimates.

"While we anticipated that Exodus would head toward EBITDA profitability in the first quarter, the magnitude of nearly $2 million in positive EBITDA was a pleasant surprise," Nairne said in a research report. "We believe this is serious evidence that the Exodus model is coming to fruition as a viable, profitable business over the long term. Further, we believe the timing to be perfect, as investors are suddenly demanding a clear path to profitability."

In the quarter, Exodus posted a loss of $42.3 million, or 23 cents a share, on sales of $134.1 million.

First Call Corp. consensus expected the Internet hosting firm to lose 26 cents a share in the quarter.

The $134.1 million in sales marks a 346 percent improvement from the year-ago quarter when it lost $23.2 million, or 14 cents a share, on sales of $30 million.

Exodus also reported a $1.7 million EBITDA profit (earnings before net interest expense, income taxes, depreciation, amortization and other non-cash charges) in the quarter.

Still, the stock wilted in Monday trading, possibly a victim of the broad sell-off in tech shares spurred on by Microsoft Corp.'s (Nasdaq: MSFT) woes.

"I hear that although Exodus had a good quarter, some people had higher revenue expectations this quarter," Nairne said. "And I think it's unfair. This has been one of those stocks that people have loved. There's some feeling that this might be a result of contracting valuations because it is an expensive stock."

But the stock isn't nearly as expensive as it was a month ago when it peaked at 179 5/8. Exodus shares hit a 52-week low of 15 last April.

"I know this sounds like a clich?, but I think what's happened today presents a good buying opportunity in Exodus," Nairne said.

First Call Corp. consensus expects Exodus to lose 24 cents a share in its second quarter and 84 cents a share in the fiscal year.

All 31 analysts tracking the stock maintain either a "buy" or "strong buy" recommendation.