Bill,
You said, "The warrants are still about the same price when the stock was low. They expire in 2002, so think the time value alone should have them moving up with the stock price, in my biased opinion. Any thoughts as to why QDELW isn't moving UP??"
The warrants have moved up. The first part of August QDEL was selling for about $3.25, it closed last Friday at $4.9375, about a 50% increase. Just two weeks ago the ASK for QDELW was $1, now it's $1.50, a 50% increase.
I picked up a bunch a few weeks ago for a $1. If I bought last Friday I would have had to pay $1.50.
In my opinion, Quidel's warrants are still a great buy relative to Quidel's common stock. At Friday's closing ASK, if you think QDEL will sell for more than $10.77 by 30 April 2002, then you should consider buying the warrants. I derived the $10.77 price from the following formula:
X = $7.50/(1-(QDELW/QDEL))
Where X is the price QDEL would have to sell for before 30 April 2002 to make purchasing QDELW a better buy than QDEL.
Before the BD suit X was typically between $18 and $20. Now it's $10.77, about 50% less than its historical range. Of course this was before the BD suit. Still, the BD suit should have less than a 10% effect on Quidel's earnings in 2002. So if Quidel's earnings would have been a buck in FY2002, as some analysts had forecast, now they'll be about $0.90. $0.90 times a conservative 30 P/E would result in a valuation of $27.
If QDEL sells for $27 in FY2002, and you bought 202 shares of QDEL for $1,000 at Friday's ASK of $4.9375, you'd make 5.5 times (202 shares X $27)/$1,000).
If you bought 666 shares of QDELW for the same $1,000 at Friday's ASK of $1.50, you'd make 13 times (666 shares X ($27 - $7.50)/$1,000).
When you buy the warrants, the big question is: What will QDEL sell for on 30 April 2002? In my opinion QDEL will sell for much more than $10.77, making the warrants a much better buy that the common stock at last Friday's prices. And since the break even is only $10.77, I expect the warrants will soon correct upward to where X is closer to where it was before the BD suit, $18-$20. So, relative to QDEL, it's my opinion the warrants should be selling for about twice their current price, and I expect they'll soon double in price.
Mike |
