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Rich, I've followed SMOD very closely for the past 30 months. Unless there is some hidden news about losing a big portion of CPQ's business (or perhaps HP's), SMOD will bounce back to much higher levels over the next 12 months or so. I don't think that they've lost a large (>15%) portion of business, or else the company probably wouldn't have 1) initiated a buy-back (although that doesn't mean that they actually will buy-back), and 2) give the earnings estimates and direction they have. So, if I'm correct, the next few months will be the time to enter into a long position. They're making a profit, they've got great managment, short turnover time, PC market is growing at around 20%, SMOD is of a decent market cap, SMOD's long-term growth rate (top line) has been around 70%, and will continue to be around 30%, the valuation is at an all-time low (based on P/B, P/S, and P/E), all these factors lead me to believe that SMOD's stock will do just fine although it will be quite volatile. I also have a
mathematical model that predicts an increase in SMOD's stock price of 46% annualized over the next 2 years, with a standard deviation of +28%/-13%, which gives a range 2 years from now of 24.8 to 42.4 (covering around 65% of the distribution) with a mean of 29.8 -- clearly outpacing a stock chosen at random, although with significantly higher risk. If there isn't big and bad news for SMOD, this puppy's going to fly over after this dip is over in earnings. Cheers, and good luck to you Rich (of course this is my opinion and I've been wrong many times before!) |
