David,
Thanks for spending the time to put together this very detailed analysis.
Your analysis appears to have two components:
1. The FACTS that are known with certainty.
2. HOPES for the future, including ABCN deal, possible future contract with MCI, and so forth.
One of the fact is that instead of 10.1 million shares we have 14.2 million shares. It is fair to assume that the market values the companies among other things, based on
EPS numbers. With the addition of 40% more shares into the computations for EPS, the stock price must go down significantly more to reflect the same valuation basis that the market had before the earning announcement.
Two other items of information provided by Par during the conference call include the FACT that the company will be usinng future earning to train the sales partners, and on advertizing. Now the increase in sales resulting from the training and impact of advertizing on income are clearly things we are HOPING for. But the FACT part will further reduce the EPS.
So with these onle two FACTS clearly, the share price will have to go down further. So the fundamental question about the shares price that one needs to ponder ia that what is the bottom for this stock, $5, $6 ,....
Now it is always possible that the market starts believing in the HOPES part of the equation. There, it seems from your analysis that the company also has built a very formidable defence against any possible increase in share price. As you had indicated in your analysis, and as we learned at the recent earning announcement, that if the stock price moves above recnt high or arount $11, magically more option would show up in the picture reducing the EPS yet again, and we'll have the same story all over again.
To me that begins to explain the departure of smart money right after the earning announcement, and more after the confernce call.
I am long, and with average price over $11, would like to remain that way. But the known (FACT) part of the future seem ominous.
Some one, please tell me where the FACT part of my scenario is wrong.
Long still...
Afaq Sarwar |
