I have difficulty with the assumptions that WCII has sold off due to the perception that it is simply a reseller of ILEC lines. To disprove this assertion you only need to marvel at the thrashing the other CLECS have taken. ICGX, for instance, posted solid on switch #'s for their quarter. I believe their new lines were around 90% on switch. The price of ICGX is down almost 60% from its high.
ICIX just went EBITDA positive, the holy grail for all of the CLECS. Still the stock heads south.
WCII's selloff is what happens to growth stocks in times of market uncertainty. Its just a fact. The funds are liquidating in order to increase the earnings power of there portfolios. The shorts are momentum players there to exacerbate the weakness. Of course, their intentions are to scare folks into questioning the very reason they invested in the stock in the first place. Or to become overly critical of minute shortcomings.
Having said that, the question is still... which way next? If you believe the market will retest the lows Wednesday, as I do, then WCII heads lower again, IMO. What will be important is whether WCII holds its low at 27 3/4, if the sellof occurs. That is how some folks, like myself, look for bottoms in individual stocks.
As far as trading this stock it would be a low percentage bet to attempt to catch the bottom at this point. The chart is terrible and momentum is in the shorts favor.
One important issue that nobody has brought up is the poor on net numbers effect on a potential takeover. In my opinion, there is no way a Telco buys this company until they get a LARGE percentage on net. Why would anyone pay the money Bill is asking for a reseller with a couple of hundred thousand resold lines with 5% margins?
WCII still has not proven the viability of this technology for the masses.
You can bet potential suitors are watching this development very carefully.
(Raise your hands if you feel like an idiot for calling the bottom at 40, 36 and 30. Oh well, live and learn. ) |
