How PROG could increase the stock price (if they want to):
If PROG management wants to increase the price there are several things that they could do:
1. First and foremost, the insiders could purchase a few shares. This would be a very inexpensive way to indicate confidence in the stock. If the chairman and the CFO each bought 5,000 shares, that would send a message.
2. They could issue a press release saying that the Forrester survey that indicated that most internet retailers would run out of cash within a year did not apply, and pointing out that they have over $3.50 a share in cash. If they wanted to, they could also indicate that as other internet software retailers become more attractively valued they may use their strong cash and management position to acquire some of the competitors.
3. They could privately discuss with their underwriters their interest in acquiring some of the failing internet software vendors as shakeout begins to happen. This would make the underwriters realize that there could be some money to be made here in the M&A area. Do not kid yourself - analysts are in it for the money, and the money comes from doing underwriting and M&A work. It won't take the analysts long to realize that PROG will need to have a significantly higher stock price in order to make these acquisitions possible, but the analysts can make that happen, if they think it is in their interest to do so. The analysts would then do upgrades to Strong Buy, and make strong statements in support of PROG, and even issue press releases on their behalf. For example, they might write: "PROG has one of the strongest management teams in the software retailing sector, and a demonstrated ability to make a profit selling software. They have expanded aggressively into the internet area, and as the shakeout of unprofitable internet software retailers develops later this year, we believe that because of PROG's demonstrated ability to be profitable in a sector where others are losing money, PROG will be a clear winner and become a dominant player in the sector." Note: don't get excited, this is a hypothetical statement - no one said this (yet <G>).
4. In their earnings press release they need to make a definite statement of their vision and where they expect the company to go. Don't focus on the past, and on the tight margins, and don't focus on Y2K excessively. Instead talk primarily about where they are going, the opportunities ahead, and how they are going to use their strong financial position to increase their market shares and profitability.
If PROG simply does number 1 and 4, this stock should move back to $10 fairly easily. If they then follow that with analysts talking about them doing acquisitions, and how PROG will be a clear winner, the stock could move to the $30s and $40s or even higher as mo-mo guys and funds jump on board. In fact $150 isn't out of the question (that would just be a PSR of 3.8, and ITRA has a PSR of over 5).
Remember, there aren't that many shares to go around. With a price in the $40s, it starts becoming very feasible for PROG to do stock based acquisitions of some of the weaker players, and with a price of $150 they would be no problem at all.
So, does a stock price of $150 for this dog sound patently absurd? Well, with the company acting like they are asleep at the wheel, obviously yes, it does sound pretty ridiculous. The stock isn't going to $150 on its own. However if management can articulate a vision of how they intend to leverage their strong management and distribution system to dominate the software retailing sector, and how they will be profitable doing so, then this stock can indeed go to $150. Or if they do nothing, it could drift between $3.50 and $10.
Carl |
