Since all the talk tonight is about the stock price, instead of the company, I'll offer a few very brief thoughts about that price. In my experience, the 52 week high of most growth issues is equal to a forward P/E of about 1.3 times the 5 year growth rate (that is, in the current interest rate environment). Looking at CYMI's 12/97 estimate of .84 and its 5 year number of about 45, this would suggest a 52 week high of about $49.00, or about $98.00 pre-split, which is exactalatically where it peaked. Right?
Now, taking the 1.14 forward estimate for 1998 (sorry, but for reasons explained later, I can't buy the revised M/S revision to $1.00), and applying the same 1.3 times the 5 year growth rate, the 1998 target 52 week high should be about $66.69, or 261% of the Friday close. And that's just 1998, bear in mind.
This leaves the question why the stock is getting trashed. I think the answers here, in inverse order of importance are: (i) shorts; (ii) fear; and (iii) the fact that every freaking share of the IPO of last September is now a long-term capital gain. On this last point, remember that even at 25 (50 pre split), every subscriber to the IPO has a 263% gain; so as the price deteriorates, it is a very easy decision for that subscriber to sell and lock in a nice gain. There is no conspiracy here as others have suggested. Just plain human nature.
So where do we go from here? The way I figure it, there are two more analysts left to speak (Zacks reports a total of four), and I think they will follow Monkey S and M/S, and they will do so fairly promptly. I therefore see the price lower in the near term as the MM's get hit with the final 2 rounds of sell orders and try to stay liquid nevertheless (this is an important point: those who believe that the MM's manipulate the market fail to recognize that they have laughably small amounts of capital; that they get fired if they don't conserve that capital; and that they therefore just flat out don't have the muscle to make meaningful price movements happen on their own). So I see the price going down as the volume thins. I haven't yet done the low P/E analysis (will do so this weekend), but for now I would guess that 20 is quite possible.
So what do we do now? If you believe the Company and the terrific insights of The Specialist and others here, and you believe that the market will value money (earnings and earnings growth) next year much like it did this year, if you haven't already bought, you buy. I have already done so, well into 5 digits, and if the issue sees 21 and the facts are unchanged, I will double up again. That's the key thing: if the facts are unchanged, and remain unchanged, in five years with stable interest rates this stock will be about $300.00 per share, unadjusted (discount to present value as you like). The only assumptions here are the reliability of the present data and stability in the time value of money. That's it.
As for Monkey S and M/S, I have only this to say: with strong buys in the 40's (post-split) followed by holds in the 20's (post split), we have to be glad that they didn't sign on as navigators when Western Europe was trying to find an eastward passge to the Orient. If they had, North America would still be a f---'ing wilderness, and we would all be savages.
Forgive me the length of this post, but I just couldn't help myself.
A good weekend to all,
John |
