David, the loss was a significant improvement over last quarter's loss of ($1.08)/share, and this is what investors are probably reacting to. Also that perhaps AVID will be profitable sooner (or more) than expected, although the street was expecting another loss this quarter. Investors like to see turn arounds, proving that the bad news is only temporary and that the company knows what it's doing. However, I think most of them are missing the big picture. (See my previous post to Patrice in this forum.)
AVID committed some serious missteps in the past year, namely taking far too long to complete their product transition to the newer PCI bus platform, but also letting their technical support suffer to the extent that subscribers were badmouthing the company and its products all over the on-line forums.
My long term outlook for the company is neutral to bearish. I did decide to get back out of the stock today. I expected a small pop, but not quite this much, so I'm going to take profits. A 35% profit in a couple of weeks feels pretty good compared to the pains I'm feeling from other issues I own! I will probably get back into it when it drops down to 16 or so, as I feel it definitely will. There just isn't enough sales or earnings momentum to justify a PE of 42 on estimated FY97 earnings. This is the same reason why I bailed last summer when the share price hit $46 and the PE went over 40. Keep in mind that many other high PE tech stocks (including some that have posted substantial earnings increases) have already been trashed or are being trashed.
Good luck,
D. Kuspa |
