To everyone:
Another day of battering in the technology sector is certainly taking its toll on investors. It is a scary marketplace right now. I would not want to left holding the bag with a company who announces an earnings shortfall.
Here is a situation that I think has great potential for 5 points profit in the shortterm.
EFII which was incredibily hammered today. It closed down nearly 25 a share or 61%. If you go back just 10 days the stock has fall from 51 or 73%. This is quite a fall. The question is does the company deserve such a drop?
Earnings are going to come in at about 50% less than expected. That is bad without a doubt, but should the price of the stock drop 73% in the light of that news? Investors certainly seems to have thought so, or did they? Well the stock was large held by institutions who dumped the stock to salvage what the could in their portfolios. It looks pretty bad to be holding a stock that is down 60-70% at the end of the year. The small guy was left holding the bag.
Todays trading with such high volume indicated to me that the bottom in the price has already hit, and some recovery is in order. Secondly the options contracts traded today, also showed a higher number of Jan 15, 17.5 and 20(most heavily traded contract today) contracts traded. This is a bullish indicator for the shortterm.
The road ahead news wise:
I think that all the bad has definitely been layed out on the table in one big "whammy." For those who recently bought, such as I, or those who plan to buy in that is great, but for those who bought in the 30-50 range, I am sorry. However, I do think the road ahead has some positive news coming.
First the company eluded to the fact that it may consider a share buyback plan. EFII has around 250,000,000 in the bank, so it would not be difficult to do. This alone would boost the price substantially.
Secondly, Prudential did a flip flop on it's buy recommedation leaving it at a buy. Though I don't like analyst's and the garbage they pull I must agree with Prudential.
Next the company has a basket full of new products slated for release next year. Some to be announced and shipped in January. Part of the revenue decline was due in part to the transition from old to new products.
The January effect. Will we have one? I sure hope so! My guess is that it won't be as robust as it has been in the past, but many are going to consider buying technology issues at these reduced valuations. Portfolio managers are going to have to purchase stocks they believe will perform nicely next year. All the analysts agree that the this stock will be back to normal in 3-6 months. Probably an easy double in that timeframe.
Hope everyone has a great weekend. Like always do your own DD, but I definitely think this is a interesting opportunity.
Take Care,
Jim |
