Jim,
I'm actually a bit worried by the numbers you posted. OTC volume is running significantly below 2Q (at 18B for Q3 versus 25B in Q2). At the same time, NASD volume looks flat quarter over quarter.
My thoughts on the BBRC earnings estimate revision:
1. I don't know the analyst, but BBRS is a significant player. A house of this caliber would have access to management and, therefore, some degree of guidance as to the earnings estimates with which management would feel "comfortable." I can see a lower "comfort" level given the numbers you posted.
2. I'm certainly curious, now, to see whether Sean Chin at Merrill reasseses his position. With 1999 earnings of $1.65, he is now on the high side vis-a-vis BBRS at 1.58.
3. If NITE mgmt is guiding lower, then the approach it has taken is certainly preferable to an earnings warning later on down the line.
4. Everyone should note that OTC BB volume, which may decline 28% Q to Q, does impact NITE because NITE has a 40 percent of that segment. According to Merrill's Sean Chin:
"We estimate that Knight/Trimark commanded about a 40% market share of Nasdaq small cap/OTC bulletin board stocks, while the next market maker had only a 15% share".
This kind of reduction almost compels the conclusion that NITE's earnings will be less than last quarter. Again, read the Merrill report on OTC BB market share and then look at the OTC BB. This is not good, and would certainly explain lowered guidance by NITE management, if such occurred.
Lastly, while none of this is great, I think the stock got taken out and shot first, and then (now) come the analyst explanations/earnings revisions. Typical after-the-fact analyst style stuff (and why analysts are so hated on SI). As it is often said, the time to get IN is when the analysts downgrade, and the time to get out is when they upgrade. (ASND is a classic case in point. The same analysts who loved ASND when it was at 60 dumped all over the stock after it dropped to 22ish, precisely the time when they should have been urging and begging people to buy it.)
Gary Korn |
