<<Mike-value is subjective and comfort levels will thus vary>>
Good point. Think of all the different situations our shareholders are now in. Here are a few:
The people who:
1) bought higher, never sold, never bought more lower, and are just now getting even after more than 1 year.
2) bought higher, took all or some of their losses, bought more lower (in varying percentages) and are now sitting on large gains.
3) People who were just eyeing the stock when the bottom fell out, saw the value and made initial purchases low, and bought more on the way up. Some of those are still accumulating and some are just holding on to larger and larger gains.
4) People just learning about MRVC right now. Some will stay for the long haul, others will exit when their price target (gain or loss) hits.
5) The real old timers - pre the 1996 splits. These people have ridiculously low average costs (like $2 or below). Some like Dan Spillane, rode the stock to the $30s and exited high and bought fancy cars with the cash. Others either only reduced their holdings or rode back down where they may or may not have increased their holdings, and are now riding back up. Some of these are now bitter and are liquidating as the price rises.
6) Traders of various kinds, buying and selling for small gains.
7) "Mo" players, piling on board when MRVC is hot and exiting quickly when it cools.
For these and other types, now is a good time to review where we stand and the reasons for holding or selling. We have now passed a 4-bagger off the 1998 low of $5 1/16. We are approaching a 4-bagger just since April.
How high can we go? Take a look at these charts.
The first is HLIT over a 100 week period. Notice how long it sat low before it "caught on". Look at what it has done since last October. $7 to $129 in less than a year is pretty spectacular (and I owned it too, but missed the big part of it's move).
techstocks.com
The next two are HLIT and MRVC statistics. Look at the P/S ratios. HLIT now is almost exactly 7 times higher. A year ago they were both very low and similar. Raising MRVC to the same P/S ratio gives a price of $157! Can someone tell me why a P/S ratio similar to HLIT or others in the industry is not a reasonable expectation, as MRVC sheds it's "baggage" and is viewed as a "player" in the Optical networking market?
biz.yahoo.com
biz.yahoo.com
Now look at the EPS numbers. HLIT is at $0.33 while MRVC shows as ($0.06), both on a trailing 12 months basis.
Now look ahead. What will it take for MRVC to post "just" $0.50 next year? I say "just" because I think it will be much higher. This will be harder because they keep boosting their R&D lines and SG&A and adding startups, etc. Let's try a simpler question. What would it have taken for MRVC to have earned $0.13 in Q2?
Even keeping GMs at 35% (they are trending up) and doing a SWAG on taxes we get a revenue of somewhere between $86 and $90 million - call it $88 million. That is an extra $15 million per quarter (less if we allow higher GMs).
In Y2K that is 40-50 Linux routers per quarter considered alone. But there will also be revenue growth in existing products, China, revenue from Redex, Wireless traffic Driver, Fiber Driver, AcceleRouter, MetroFusion and Aranea plus OA and HC growth too.
I think that MRVC could approach $400 million in revenue next year with even "moderate" success of these new products. And if they follow through on their promise of alliances and partnerships they will have more than moderate success.
Also, apart from revenue and EPS growth, we have lots of potential good news out there that can boost us:
Redex announcement
New startup announcement
New OA CEO
IPO for all or part of OA
2nd round funding for the startups - and the cash infusions that would come in with that.
Alliances or partnerships - as promised.
Actual sales and contracts for the new products
Continued interest by the "MO" players
The bottom line is that everyone has to make their own risk/reward decisions. IMO, this stock is just starting to roll, and could go much higher as these things all play out. Taking some profits is human nature, but exiting just when a stock is starting it's move can be a mistake too - HLIT again (Oooh if I had just held longer)! |
