Larry, I actually can see a scenario in which the stock will reach the range of $50 to $65 this year (I doubt before July, but later, maybe). Mind you, this is a "possible scenario" and not necessarily what has a high probability to occur. The first thing required is that liquidity will exceed available supply of stock priced rationally. We have had this situation for quite some time, and after the recent blip, I think that once more we are going to see excess liquidity chasing limited assets. A buyer of such assets simply looks at a universe of stock and in lieu of measuring the PE it might have in two years, they ask themselves what kind of market domination will that company have. Take YHOO, the cap is $80 plus billions, if we follow your argument, at a PE of 50 that will require it to earn $1.6 B in 2002, well they may have sales of just north of that, but surely not earnings. I took on purpose a company that is already well established and has some current sales and earnings, I could compare to a number of biotechs that are not even going to have earnings for the next five years, but they are bought and sold on the expectations of what their market dominance might be in certain fields.
A scenario that could see VLNC valued at a cap north of $2.5 Billions would require a major order (I would guess, $50 to $100 MM) which will clearly indicate that VLNC is leading the pack in this market segment and thus provide visibility of it (in due time) indeed reaching sales in the $billion range. Now, let say that VLNC survives the next two months without breaching again the $15 (not a sure thing mind you), then I could see it starting the next "summer rally" poised to take out the overhead supply first in the $26 to $30 area, and if now we get this elusive big PO, it could easily double from there before the election. That is nothing more than a "scenario", not a "certainty" as Fred always like to paint VLNC's future moves.
Is that scenario likely, I personally think not, but many on this thread will differ with me. I think that VLNC is in a definitive down trend, and such a down trend would have not developed if such a scenario was in the immediate future (too many deep pockets would know about the chances of such a scenario evolving, including CC, and thus would not have been selling shares to the extent we saw). Such a downtrend has a tendency of continuing, guess until when, well, until it is reversed, of course. Right now, I see only a DCB from this week swoon down, and until we see better technical behavior, I will have to maintain the stance that the downtrend is still on, not withstanding the rosy scenario painted above. It is kind of another version of "when the TA and FA do not jive ....".
Zeev |
