Among the biggest losers in Friday’s early trading are InfoBlox (Nasdaq: BLOX), Pandora (NYSE: P) and Mattress Firm Holdings (Nasdaq: MFRM).

 
Whenever a company says its plans to ramp up internal spending to meet future growth plans, it can mean one of two things. First, it might signal that core organic growth is getting harder to come by and sales will sharply slow if the company doesn’t step on the gas in terms of spending. That’s a stock to avoid. The second kind is better: that’s when a company is spending more now because the market opportunity is so robust, that more sales people and engineers are needed to grab all the low-hanging fruit.

That appears to be the case with recent IPO Infoblox, which told investors Thursday evening, Sept. 6, that a ramp-up in headcount will cause expenses to be a bit higher than analysts had previously anticipated. Myopic investors are pushing the stock down about 16% this morning.

That’s short-sighted. After all, Infoblox has quickly emerged as one of the leading architects of cloud-based computing, or the use of computing resources delivered as a service over a network — one of a number of growing trends from which Infoblox is “well levered” to benefit, UBS suggests.

The analyst community is relatively accepting of the move to hike spending — despite the negative share-price reaction. “We feel the company is growing increasingly critical to the adoption of cloud  technologies and we view the investments favorably, as they should help to position Infoblox as a core provider in the build-out of cloud infrastructure,” note analysts at JMP Securities.

Both of these analysts have $25 price targets — only 20% or so above the current level — but those are based on near-term sales and profit forecasts. Yet if you’re looking for high-growth opportunities and have a multi-year time horizon, then today’s sell-off looks like a nice entry point with the possibility of much sharper upside than those price targets imply.

Does anyone still need a fancy mattress?
Whenever an industry is growing rapidly, analysts tend to simply model continued strong growth into subsequent years. Yet as we’ve often seen, an industry can only grow quickly until demand is saturated. In the case of mattress makers, that saturation point came a lot sooner than anyone expected.

The seemingly boring mattress sector grew exciting in recent years as key players embarked upon an arms race to see who could offer the most comfortable, and expensive, mattresses. Apparently, the market for high-end (and very profitable) mattresses is more limited than anyone knew. Investors found this out when Tempur-Pedic (NYSE: TPX) announced a huge quarterly shortfall in early June, sending its shares down by half in one day.

Since then, we’ve heard of other firms speaking of similar slowdowns, so it’s no surprise that Mattress Firm Holdings tacitly noted on Thursday evening that organic sales growth in the quarters ahead won’t be as robust as some had been anticipating.  For example, while analysts are expecting $274 million in sales in the current quarter, the company anticipates sales in the $270 million to $275 million range. Not so bad, until you realize that the company just completed an acquisition that should add to sales (later) in the current quarter. Translation: without this deal, third-quarter sales would be $5 million to $10 million below what analysts had been looking for — which helps explain why shares are falling more than 3% this morning.

What the market giveth…
Pandora’s honeymoon was surely short-lived. Only a week ago, I was mentioning this music streaming firm’s impressive 17% intra-day spike.

Well, news that Apple (Nasdaq: AAPL) may look to deliver a similar competing music streaming service is predictably being seen as very bad news, pushing shares right back down to $10.75. Will Apple make the move? It doesn’t matter. Simply the mere possibility of such a development will dog shares of Pandora until and unless Apple explicitly states that it won’t make such a move. And Apple never talks about its future plans.

Will Apple simply look to make a quick splash in the space by buying Pandora? That seems unlikely, though it could lead a rival such as Google (Nasdaq: GOOG) to make such a move. That’s too speculative a reason to own this stock, and you shouldn’t look for an imminent rebound.

Action to Take –>  Of these three stocks, only Infoblox looks to possess robust growth prospects. But shares aren’t a bargain based on near-term metrics, so you need to own this stock with an eye on the long-term opportunity.