Re: "I guess you don't think this stock will turnaround ..why don't you like it.."
Well not exactly Sue. I do believe SyQuest is making some good progress in their turnaround due to the SparQ. I also think they'll turn a profit within the next 12 months.
Here's what concerns me most about SYQT as a long term play:
Future EPS - I run my own projections, and due to SyQuest's weak financial situation, large stock dilution, new competition and slim gross margins, I find it difficult to imagine that they'll be able to sell enough SparQ products at enough of a gross margin to provide the level of profits needed to justify significant long term appreciation in the stock. IMO, even when/if production and unit sales reach 500K per quarter (for example), SyQuest will be lucky to see 3% NET profit margins. One additional point to keep in mind is that sell prices will most certainly drop in the future as competition increases, and probably just about the time SyQuest has sustained profitable manufacturing levels.
I expect SyQuest to continue to improve and as a result we will likely see the stock react positively at times. These are the types of moves I will be looking for as a trader. Unless however, SparQ unit sales can grow well above 2-3 million per year while maintaining good gross margins, the stock will eventually reflect a valuation that doesn't provide the type of long term appreciation that I think is worth the risk.
Regards - Dale |
