Mike's question is compelling. If the results will be so good, wouldn't
you expect that insiders would be buying in advance of the news,
and then sell on the good news? If so the stock would be going up in
advance of the announcement. That has been my thinking, up to now.
I expect better than projected earning (.08US by Firstcall) in Q2, and
I've been expecting to see a big run up in price. Some of the factor are:
1. A lot of Suite 8 shipped in Q2 and will be recognized as revenue in
Q2 (it counts when it goes out the door, not when sold off the shelf). It
was showing up on the east coast and west coast in May. The retail sales
volume seems to be good, but will not effect Q2 EPS. (Of course it matters
a lot for the longer term.)
2. First call has improved its recommendation by another .2 points (6/16/97),
from the previous week (3.6 to 3.4). It was at 4.1 on 4/21. A 1 is strong buy,
a 5 is strong sell. They also raised FY97 EPS to .20, up from .13.
3. The big write-off ($113) seems to be a non-issue to analysts. If the
write-off is seen as an adjustment, rather than a loss, it adds about .15US per
quarter to the earnings (save $10M per quarter divided by 70M shares), that's
.60US per year.
As a side point, I don't see the big deal with CASH vs A/R. They have
no effect on EPS, and I expect A/R will go up a lot because Suite 8
ships in Q2 will go to A/R. But to my knowledge, CASH is not a big issue,
as long as you make sure you have accurate allowances for uncollectable
A/R.
But, why is the stock flat on Friday, just before the big announcement?
My new idea is that the pro's are way ahead of me. Corel has already
gone up 25% in the last 60 days from its low of 5US. There have been
some pretty good volume days in that time. These guys have already gotten
in low and sold high. If you look at the Corel graph for the last year,
a lot of investors have gotten burned for holding on for too long after
an end of quarter run up.
However, I still hope for a good surprise on Monday evening; an EPS of
.10 for the quarter (excluding the write-off) would exceed estimates).
From everything I see, the number could be a lot larger. But, then, today's
stock price says it won't be. Some say the market is always right. We'll
know on Tuesday. In any case, I'm a believer in what Corel's doing.
up, up, and away,
Irv |
