Sell in May and Go Away? No Way! QLYS Stock Is One You Should Grab Now

If ever there was a stock that embodies the stock market adage “sell in May and go away,” it is Qualys Inc (NASDAQ:QLYS).

qualys-inc-qlys-stock-logo-185QLYS released Q1 earnings after the closing bell on Monday. The good news was that quarterly revenue grew 24% year-over-year to $37.4 million, which translated to adjusted net income that more than tripled to $5.5 million, or 15 cents per diluted share.

Analysts, on average, were only expecting adjusted earnings of 11 cents per share for QLYS stock, but on slightly higher sales of $38 million.

So, QLYS beat the consensus estimate. But here’s the bad news: Qualys announced a disappointing sales forecast for full-year 2015. And as a result, shares of QLYS stock are down 28% this week.

However, it’s time to be a contrarian on both a micro and macro level.

I long have been railing against this “sell in May” silliness. Now perhaps at one point, this made sense — like in the summer when most New Yorkers didn’t have air conditioning. But those days are long past.

Yes, there have big some big market selloffs in May over the years, but many studies have shown that staying invested in the right stocks through the summer would return you much more long term than selling in May and buying back in September.

It’s all about choosing the right stocks.

And QLYS fits the bill to a contrarian “T.”

Tech has been on a tear, and a lot of tech stocks have been soaring far above their limit for quite a while — especially social media stocks and biotech stocks.

But QLYS is in the cloud security business and if there are two sure long-term growth sectors, they are cloud computing and cybersecurity.

Granted, QLYS stock was trading at a price-to-earnings ratio in the mid-50s until the hammer came down earlier this week. Its valuation needed a haircut to be sure. And that it happened quickly was also much better than it it losing 20% over days or weeks. That would signal something more dire with the company.

This was simply a reset once earnings were announced: it hit Q1 earnings but warned lower for the entire year and the market decided to cut its valuation accordingly. Nothing personal.

What were the numbers that triggered the selloff?

For 2015, Qualys lowered its sales projections to between $165 million and $166.5 million — and that’s still 24% annual sales growth!

Previous guidance for sales was between $167.3 million and $169.3 million. Earnings are still expected between 50 cents and 55 cents per share. Analysts are currently looking for earnings of 53 cents on $168.4 million in sales.

QLYS adjusted its guidance because it sees growth slowing down in its vulnerability management business. But the rest of its operations continue to do well.

In fact, Baird analysts upgraded QLYS stock to “outperform” this week, citing new products in the company’s pipeline and expanding margins that make it a good buy on the pullback.

And so do I. This is a great time to buy in. The stock just went on sale and its priced with some downside discount.

QLYS is a buy-in-May stock, not a sell-in-May ghost story.

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip GrowthEmerging GrowthUltimate GrowthFamily Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

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