I agree that it is tempting to buy PSDI now. However, the situation is different than 3 months ago, when PSDI beat expectations by ~13%. To go from beating estimates to significantly undershooting them is not a trivial issue. There apparently were marketing and competitive problems in Europe. Does anyone who is now buying PSDI know that these problems have been solved? I don't think so. The problems may indeed be temporary, but they may be a larger problem that will get worse. I don't see any indication now is a good time to buy. PSDI may be oversold now, but it may become more oversold. Until there is some kind of uptrend or reversal, why buy it?
I made a similar move last summer, when Global Village gapped from 16 to 12. The news was a revenue shortfall, due to the effect that Apple's Powerbook recall had on GVIL's modem card business. I thought it was an overreaction, and GVIL look "really undervalued." I bought and held until the fall, when I sold at $7.00. The company's bad news continued, as they ran out of cash and issued a secondary offering at $3. GVIL said they were going to restructure their business so they could return to profitability. The stock is below $2 now.
What about those people who bought Cascade (CSCC) when it gapped from $66-$41? They thought it was oversold, but the news got worse, and the stock fell to $25. If Ascend hadn't offered to buy them, the stock would probably be at $20.
I can't see how anyone can look at the PSDI chart and say that there is a short term target, or it's going to $21 in 6 months. It might go to $21, but it might go to $5 before that. My bet is that the stock may bottom at $10, as long as there's no more bad news. I hope that anyone who buys now is correct, and the stock has seen it's worst. However, note that PSDI closed lower on Friday, when the Nasdaq moved up 2.5%. That's not a good sign.
I won't even consider buying more unless the company can convince me that this is temporary. Besides, there are plenty of better bargains out there that don't have question marks.
TDW |
