Your getting alot of credit for the recent drop Steve (see below). I welcome all news good or bad since I'm here to make money but I'm afraid I don't beg for info that I can look up in five minutes myself.
Here is what OPMR's investment bankers said this morning:
<<
o Stock has been under some pressure; we believe the reason is due to a
mention in Business Week. OPMR shares have been under some pressure lately.
We believe this is attributable to an article in Business Week where the
stock was mentioned as a short idea. The article lacked any details or
substance relating to Optimal and simply had a quote from a money manager
stating "This ain't gonna happen", referring to the company's proprietary
self checkout system. Despite the lack of details, we believe Optimal's
mention in this article has helped fuel some of the downward pressure on the
stock. While some may continue to be skeptical of self-checkout technology
for the retail industry, we do not have any doubts that demand for self-
checkout technology (specifically Optimal's U-Scan Express system) exists
and, in fact, continues to accelerate. We continue to rate OPMR BUY with a 12-
month price target of $60 and believe recent weakness should be used to
aggressively purchase OPMR shares.
o Retail investors can be heavily influenced by the media, in our opinion.
We believe the stock has primarily been pressured from selling by retail
investors. This makes sense to us, in that we believe retail investors are
the ones most likely to be influenced by the media. This trading
circumstance, however, has nothing to do with the company's fundamentals or
the growing momentum of self-checkout technology, in our opinion.
o Information flow naturally slows down this time of year - commitments
should come later in the year. Retailers tend to finalize their budgets and
plan for major capital expenditures for the coming year in late fall/early
winter. That is why we saw a flurry of announcements regarding U-Scan
commitments for the current year at the end of 1999 and first month or two of
2000. While we believe additional customers are testing U-Scan and other
lower-volume customers continue to order systems over and above the company's
existing backlog, we would be surprised if major commitment are made to U-
Scan during the next few months - the business just doesn't work that way!
Retailers generally use a pool of discretionary funds to install initial
systems and possibly even fund a low volume rollout, but would generally need
to finalize their capital budgeting before they begin a major rollout (which
we define as 50 or more systems). We clearly expect additional major
commitments to the system, but they will likely materialize much later in the
year.
o Stock should be numbers-driven until 4Q, when backlog for 2001 will
start to build. We believe the principal nearer-term catalyst for OPMR will
be 2Q and 3Q earnings reports. On-target or better revenue and earnings
growth vs. very aggressive targets should increase investor confidence in the
demand for U-Scan and in Optimal Robotics ability to execute. We are very
comfortable with our 2Q estimates and expect both sales and EPS to more than
double, to $15.7 million in sales (vs. $7 million) and fully-taxed EPS of
$0.10 (vs. an adjusted $0.04 last year), with a 500% increase in pretax
profit to nearly $2.2 million. Given early indications and order flow, we now
believe upside may exist to our 3Q forecast of $19.7 million in sales (vs.
$10.7 million) and EPS of $0.12 (vs. an adjusted $0.08). Very few companies
are exhibiting the revenue growth of Optimal Robotics and an even smaller
percentage are profitable. Optimal's combination of high revenue growth,
strong future growth prospects and increasing profitability is very desirable
and very rare. Further, such financial performance should attract additional
investors and eventually fuel further multiple expansion, in our opinion.
o Europe provides significant incremental opportunity. In addition to the
substantial market potential Optimal is currently addressing in the US, we
believe the company's recent licensing agreement with Retec Europe for
distribution of U-Scan in the UK is a crucial first step. Management
estimates its UK opportunity at nearly 4,000 stores (just in food and general
merchandise). While we have not assumed any international sales for Optimal
in our model, we believe the company's overseas opportunity is material and
its risk profile is limited due to the expected structure of its agreement
with Retec.
INVESTMENT CONCLUSION
In light of numerous disappointments from several high profile companies in a
variety of industries, we believe revenue and earnings visibility is more
important than ever. Whole sectors are under increased scrutiny because of
rising interest rates, fears of slowing consumer spending and, for those with
international exposure, currency risk due to the strength of the US dollar.
We believe these circumstances could cause an even greater move towards
"theme investing" or looking for long term trends with substantial growth
potential. No matter what the Fed does, we do not see the tight labor markets
changing any time soon. Further, we believe automation of the checkout
process for retailers is very logical and desirable for both retailers and
consumers. Given Optimal's high level of revenue and earnings growth, we
believe demand for OPMR shares will likely continue to increase as the year
progresses. We continue to rate OPMR BUY with a 12-month price target of $60.
Basic assumptions in our financial model
2000E 2001E
U-Scan Express Sales 570 885
Solo and Carousel Sales 6 25
Total Revenue (mm) $58.7 $91.3
EPS $0.30 $0.95
Source: Gerard Klauer Mattison estimates.
+ Gerard Klauer Mattison & Co., Inc. is a market maker in the security of
this company and may have a long or short position.
* Within the past three years, Gerard Klauer Mattison & Co., Inc. was the
manager (co-manager) of a public offering of the securities of this company
and/or has performed other banking services for which it has received a fee.
# The Firm and/or its employees is also the owner of options and/or warrants
in the security.>>
Obewon/Valuation Guy |
