There is no reason for the price to go higher.
And no reason why it won't. The fact that the price is not $1.50 does not mean it won't go back there. In fact the chart shows it goes there over and over and over.
Do you believe that the vast "weighing machine" of Covad's shareholders has declared the company is only worth $0.90? That's just the current trading price.
A year ago, sales were (a smidge) smaller, less diversified, more wholesale, lower arpu, and yet the stock price was over $2. Was the company really over twice as valuable then?
This is NOT a fast-growth company, and wanting it won't make it so. The company has a cost-cutting mindset which is directly at odds with aggressive growth.
IMO by valuation, the price is sorely undervalued, by at least a factor of 2-2.5. This is based largely on the value of the network and the options it provides. Companies in this situation don't usually trade on valuation, however, because there are more important immediate considerations that wash out most valuation issues, and/or there are no events on the horizon that will unlock that value.
Valuing the company based on its ability to generate cash and profits? On that basis Covad has a long way to go to justify a higher share price. This belief formed my basis that our $2 price from last year might not stick ....why should it?
Until COVD gets some real traction and starts improving the GAAP bottom line by $3-$5m per quarter, my best guess is that the share price will continue to bounce around all over the place, from $0.50 to $3. It doesn't take much to shove it around.
Andre |
