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Strategies & Market Trends : The GUMMMy Bear Squad touting Gum Tech (NASDAQ: GUMM)
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To: Mad2 who wrote (160)3/9/2000 8:41:00 AM
From: DanZ  Read Replies (1) of 207
 
Mad2,

My estimates never come from Gum Tech. They are based on what I consider to be sound logic, speculation, and due diligence. Even if sales in Q1 00 are flat with Q4 99, I disagree that "GUMM is in deep trouble". Stocks trade more based on expectations for future sales and profits than a single quarter's results. The world is big and they have only touched the tip of the iceberg with Zicam. Let's assume the worst case: that they do $8 million in Q1 00. They did $8 million in Q4 99, and this was negatively impacted by production problems in the fourth quarter. There is every reason to believe that domestic Q4 00 sales will be higher than domestic Q4 99 sales. If you add in international sales this year, the company could still easily sell $50 million worth of Zicam this year. What market cap would you give Gel Tech based on $50 million in sales this year.

Then we have the nicotine gum joint venture with Swedish Match. They may start shipping product in Q3 and Q4 this year and should pick up momentum next year. What is your sales estimate for this joint venture? Do you agree with my low end $50 million estimate for 2001? If so, how much is the joint venture worth and how much value does it add to GUMM? Next year is right around the corner, and even if you discount the earnings from 2001 to the present, it won't decrease the present value much.

Then we have dental gum with the domestic toothpaste company and the rest of Gum Tech's gum operations. How much do you think that this is worth?

Then we have new products under development. I can't provide any estimates for how much they are worth because I don't know exactly what they are working on. Rest assured that Gum Tech is not sitting still on Zicam and nicotine gum. Both Gum Tech and Gel Tech are developing news products and new relationships. I suspect that Gel Tech is working on an allergy medication that uses the same delivery mechanism as Zicam. This may or may not be a zinc based product.

Come on Mad2. I have shared my honest speculation. Why don't you be honest and stop valuing Gum Tech as if their only product is Zicam. Also, do you really think that the market would yawn if the two clinical studies that we are waiting for are published? Can you honestly say that the market will yawn if Zicam is clinically proven to prevent the common cold and that study is published in let's say, JAMA or The Annals of Internal Medicine? GUMM is a lousy long-term short bet, although it can be a good short for a trade based on technical analysis.

PS to Phil: I wasn't comparing GUMM to VPHM or CIEN. I was merely trying to point out that stocks get pushed to unreasonable prices based on news and hype. The thing that CIEN and VPHM have in common is that both stocks have been pushed to ridiculous prices based on hype in their respective sectors. I believe that both stocks will eventually trade lower but it is dangerous to short them.

Best regards,

Dan
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