Bill, I've given up trying to figure out the short term moves of this stock. There hasn't been any news as far as I know, and this is probably just a recovery from all the selling that occurred when the bad quarterly results came out. As I've been saying for a while, this is a terribly-run company with the best products in the industry, the defacto industry leader. But they couldn't make one penny on their best quarter ever. No wonder the president resigned a couple of months ago.
Long ago, I gave up the idea that Avid was going to be a great investment/company to hold onto during this nonlinear digital video revolution. Its major run to the high $40's 1993-95 was probably its flash in the pan; there was almost zero competition during that time, and they were making money on record sales/earnings almost every quarter. Because of their superior products and strength in the market, I think many investors still have the mistaken impression that Avid can run back up to the $40's, especially those that were left holding the bag when the stock crashed last December. After the crash I felt sure it would get back into the high $20's, but I've since realized that even that was too optimistic. So I began advising everyone that those recoveries back up to $21 or so were not going to hold and that the fair value was much lower, more like $14. Now who knows? The news keeps getting worse.
I've been very successful (4 times in past year) buying on the dips and selling when it peaked 3-5 points later. Not a fantastic return, but those few points X 4 have added up to a nice chunk of change from the churn. And the pattern has been very predictable. The big institutional investors bail out big time on each new revelation of bad news, driving the stock price down steeply, then others rush in to scoop up what is perceived as a bargain since Avid is such a market leader.
But I think the optimism which has always brought the stock back up from its dips to somewhere around 25% higher than its fair value might be languishing. It recently dipped to a new low. Take a look at the earnings (loss) estimates on First Call. ($0.02) current quarter, ($0.04) next quarter. And with losses continuing indefinitely with no hope on the horizon, there's no way to project the potential bottom for this stock. My guess is it might be $8 or $9.
So, I'm going to get back out at $15 or so, and this'll be my last quick turnaround trade on Avid for a while. By the National Association of Broadcasters show in April, we'll have a much better picture of where Avid might be headed for the rest of '97.
Good luck,
D. Kuspa |
