Carlson,
I have listened to the conference call and I am prepared to comment. However, before I do let me state, for those of you that haven't figured this out yet, that I am a trader not an investor. I look for short term price swings not long term value.
The conference call was very impressive and certainly gives ADTN good grades as a long term investment for the next 4 to 5 years. However, two statements made by Mark Smith stand foremost in my mind from a short term perspective. He clearly states that the unusually high serge in their HDSL sales in 3Q was a one time event and not likley to reoccur. He also stated that they are not in as good a position at the beginning of their 4th quarter as they were in the beginning of their 3Q. In effect, what he said was the long term trend for ADTN is an increase in business in the next 4 or 5 years but it may not necessarily rise at the same rate from qaurter to quarter. Just common sense. From year to year, things will improve but not every quarter will be a record breaker.
Given this scenario one has to ask the question- What vaulation does ADTN deserve right now? The stock has more than doubled in the past 6 months and is due for a correction. The current price not only reflects this years gains but next years as well. In fact, if you go to the Vector Vest sight at www.vectorvest.com and ask for an evaluation of ADTN, it gives you a value of $16.50 a share! Realistically, the stock should be trading in the $25-$30 range. Still an impressive gain over the years low at those levels and a much better buy. Why would anyone think that just because ADTN had a good quarter it deserves to become even MORE overvalued? I don't think anyone would deny that Intel is a fast growing company too but would you pay $200 a share for it right now? Why do you think the analysts that recently downgraded ADTN did so for valuation reasons?
I'm looking for a correction to the $36 level before the uptrend resumes. If you're in for the long haul, stay long. If you want to be long, wait for a better price.
Todays stock price movement seems to support what I am saying. Today's low has already exceeded yesterdays. Also, if you check the short interest on ADTN you'll find that I'm not alone in thinking this stock is due for a correction. When I shorted this stock several weeks ago I didn't even get all the shares I wanted. My broker could only fill 2/3 my order. I tried to short more again yesterday. Again, no dice. That kind of says it all.
Hank |
