SURE update:
at 6:30pm Friday SURE announced the following news:
biz.yahoo.com
On the surface this seems like great news and will get plenty of play on CNBC on monday morning, but is it really?
Back about 10 days ago, Merryll Lynch provided a research report.
From that report and other sources every machine that SURE provides less than 1/2 cent goes to the bottom line.
What does the recent contract really mean to SURE?
8 machines over 6 month provide a total of 3.5 cents to the bottom line and if another 12 more machines are ordered (which is just an option and never happen, earliest being about 6 months from now) that would mean a total of 9 cents combines gets added to the bottom line over the next 12-18 months.
Not exactly a lot for a company that lost 14 cents in the recent quarter and warned for next year.
Another very important fact:
"What we are doing is delaying deliveries to some of our other customers," the CEO said.
With this in mind, the benefit of new order will be almost non-existant.
(beause of loss of revenue in ordinary operations)
Here is what Herb Greenberg had to say on Friday night about SURE:
"10/26/01 8:03 PM ET
The hope and hype over Surebeam in the weeks after 9.11 was that its meat irradiation machines would be used to zap anthrax-tainted mail. Well, Titan, Surebeam's parent, announced Friday that it has received orders from the Post Office for 8 machines for $40 million. And it'll contract with Surebeam to build 'em.
BUT..., after all is said and done, according to a Merrill Lynch analyst, Surebeam net only $2.5 million per machine, or $20 million, which translates into around 4 cents per share -- a drop in the bucket for a company that last quarter lost 14 cents. The analyst, who LIKES the company (he took it public), also notes Surebeam has potential competition in the mail-zapping business, and notes Surebeam is getting half for this deal than it usually gets from selling to meatpackers.
How will investors react? Initially I thought this would lead to a big retail hype on Monday. Then I wondered why they would've released such good news late on a Friday. Well, the answer is that it isn't good news. One shortseller, in fact, said he thinks it puts a lid on the speculation. For the sake of investors, you can only hope so. hg "
What will SURE trade at on monday:
This is a hard question, but I will give it my best guess.
All the speculation is gone, which is what was driving this POS.
It will probably have some kind of gap up as CNBC will be pumping this story all day long.
After the gap up there is nothing to support the price higher IMHO.
The stock will once again have to start trading based on fundamentals, which are terrible and the reason why I shorted this stock.
This will probably be a classic "buy the rumor and sell the news" scenario.
I believe that is a very solid chance for SURE to get spanked monday.
Certainly 1 month form now SURE will be a lot lower than current levels, unless there are other orders to come.
Any gap near 15s and I will be shorting more of this bloated pig.
I am sure I will not be the only one based on the above thoughts.
This horse is on its last mile.
Enjoy rest of the weekend and happy trading.
Michail |
