Is J.P. Morgan Being Conservative on Purpose?
Rodney,
I think you're wise to be skeptical of JPM's
$42/12-month estimate. Think about it. Unlike
Cabot/Lutts, JPM doesn't have any particular
vested interest at the moment in hyping the
stock into outer space. Now that they've
cleaned out the little folks and the panickers,
that the small-caps have had to sell out, and that
the stock has bottomed out, it's their job to build
steady--not wild--positive momentum, leading
up to the Q2 report in mid-July. They're only
saying it'll be $42 for the same reasons that
KE was quick to correct that 8-million-Zips-per-
year slip down to a 5-million figure a while
ago. Note that KE then turned around at the
PC Expo press conference and said that they
had resolved their production problems. Firms
like JPM simply have to be understated about
such things. Their clients won't complain
about investing in a stock that exceeds price
estimates, but they will indeed complain about
investing in one that doesn't perform the way
JPM predicts. Also, they now have a strong
incentive to push the stock somewhat because
those folks they sold IOMG to at $35 don't
want to see it tank down to ten or fifteen.
Given such incentives, wouldn't you set an
easily-reached lowball target if you were JPM,
and wouldn't you announce it right now, to
prop up the price after the Cabot dive?
Admittedly, I'm being self-serving by saying this.
I'm long at an average price of $44 at the moment.
(I would have bought more this morning at about
$23, but my wife wouldn't let me sink any more
money into IOMG--no lie. After watching me lose
a gob of money on paper in the last month, she's
understandably concerned about my investing
prowess. I'm hoping that this particular
incident will teach her a little about how
fundamentals-based investing in growth/momentum
stocks works, just as I learned a lot from Joe
this month about how an overheated stock gets
ahead of its fundamentals. Had I not made a
bundle going from $0.98 to $9.75 post-split
when I sold last March, I guess I'd be worried,
but even with the slide in the past month or
so, I'm still in the black overall with this
stock, which is pretty amazing.)
I'm still pretty confident that we'll see
somewhere between $60 and $100 in the next
year to eighteen months. If the Q2 numbers
are over about, oh, $320 million, that'll be
a good hint that $42 is likely to be conservative.
Even if JPM's price turns out to be about
right, there'll probably be at least one
more momentum surge past that target before
the price settles there (especially if Cabot
gets back into the picture). So, Rodney, if
you don't want to wait out the JPM estimate
into FY97 and beyond, the way Young says he's
going to do, then watch for that surge to,
say, $65 and pocket your profits then.
For myself, I'll be sorely tempted to
do that unless Young talks me out of
it, or the Jaz is bigger than I expect
and the LS-120 utterly fizzles, or the
INet-box/game-box scenario pans out, or....
This sure is fascinating to watch. We're
all going to fib about this to our grand-
children, I bet.
Cheers, Tom |
