My guesses on JBL selling:
I suspect we had a lot of short timers in the stock. And a there seems
to be a lot of money playing the swings in Jabil; the 'players' are hanging out here. Then HP had some gloomy forward looking statements. And Dell reiterated that their component prices are dropping leading to earnings improvements.
Also I understand that Hadco will report poor earnings, and the short sellers may be playing in this trend in the "PCB makers". Indications are that the board makers are getting some big competition from Asia. I thought Hadco was to report last night, then nothing, but they do report tonight.
I think that Jabil selling off on the Hadco news is ridiculous. Hadco makes the barebones boards, and part of that biz is a commodity biz possibly subject to pricing pressure from overseas. The HP news is on the whole, great for Jabil; the sale of the new business units from HP won't even be closed until August, and its incremental to Jabil's existing biz to the tune of $500M+, and it adds to earnings next year. And there could (should) be several new contracts with other customers to report over the next six months. And anyone who feels the Dell comments reflect Jabil, doesn't understand the stock or the industry.
This company should do more than $2B in revenues in FY99, and
although the margin will be somewhat smaller than historical due to the nature of the new biz they're getting, the EPS estimate for FY99 is way too low. I expect $2.50+, so the company is going to grow earnings 35+%, and is trading at about 15-16 times forward
earnings.
I thought the selling might be due to the recent SEC 144 filing of an
insider sell by Sansone in late April at prices around 38. I understand is was about 170,000 to 180,000 shares, which is a significant sale. I don't have access to all these insider sales info, but this could be spooking the market. Rumor is that Sansone sold to pay taxes and cover a divorce settlement.
Long term Jabil looks great, Hadco announces after the close, and I suspect we will see a rebound tomorrow in Jabil. I bought some Jabil today.
Paul |
