Victor,
It's my opinion that the management of AVNX is as good at selling stock as optics modules. I'm reviewing the reports available at Schwab Signiture Gold Research and what I'm seeing is a concensus view that FY2002 earnings are expected to be $0.67 per share. Growth rate for the next 5 years is expected to be about 35% per year. My general sense of a correct valuation is that valuing this at over a P/E 100 based on forward looking earnings and growth would be more than this market is willing to pay. So, fair value for this stock, IMHO, is about $67 per share today. I've seen a lot of companies with a much greater growth rate, and I'm not quite sure how to factor in the amazing amount of venture capital that has been thrown at the Fiber Optic component sector over the last two quarters, but it has to have a negative impact on the future prospects for AVNX.
This sector is going to suffer the same sort of consolidation and bankruptcies that are now plaguing the dot.coms world. It is an inevitability because there simply isn't as large a market for fiber optic components as there is a burgeoning supply.
AVNX is one of the best competitors in the field, but it will be far from immune to the re-organization of this industry in the next 18 months. Simply stated, as the market is rationalized, stock prices will deflate.
Today, those who are playing the game of stock picking are going to be in for a rude awakening. Similar to the one that happened between 1972 and 1974. In that instance, just to put things in perspective for younger traders on this thread, stocks that represented the best, profitable companies in America were selling at a P/E of 12 in 1972 and could not be sold in the public markets for a P/E of 4 in 1974. It is important that retail investors understand that we are in a bubble, and that it is being burst. No stock is going to be immune to the damage. The only thing that will change this picture of a declining market is a move by the Federal Reserve Board to reverse course and lower short rates, increase liquidity and permit itself to reflate the stock market bubble. This is not something that I see happening before spring.
Sorry to be long winded. I'm watching CNN with fascination, and realizing that this election debacle is not going to be settled anytime soon. The partisanship is far too entrenched and the stakes are far too high for this to be ended without a huge fight. And as long as it goes on, there is no one, except the reckless speculator entering buy orders in the markets. Looking at the volume on AVNX since Tuesday, we are trading about half the volume of the past month. THere aren't any buyers coming in, nor are the holders selling. But I'd say the preponderence of evidence is that the news on DELL, INTC, WCOM, T, BT etc. will not leave AVNX unscathed.
JMHO, Ray |
