Ron,
I gave up long ago trying to pick exact bottoms. The first analyst to change her recommendation from a buy to a hold (in October) was Montgomery's. As I interpreted her writings, because Rays was going to need to reduce huge inventories, Oakley would surely get hit. I thought Rays' problems were accounted for in the market as Oakley went from 22ish to 15. When Oakley made an announcement a couple of weeks back that they weren't going to be fulfilling outstanding orders to Rays, and that their earnings would be 10 cents and not 16 cents, the stock went from 15ish to 11 1/2, and since has gone lower on momentum. I didn't think the market would take the news so poorly, as it wasn't exactly a surprise. (parenthetically, I was surprised that the Rays orders would affect OO's bottom line this much. Oakley is less dependant on Rays this time of year -- I speculate that Oakley is positioning itself to beat the estimate -- we'll know the first week of February).
Even though the other analysts followed the Montgomery lead in lowering the Oakley rating from buy to hold (but not until after the Oakley announcement), the Montgomery analyst has retained her projection of 94 cents for the 1997 earnings. In other words, at this point, she is expecting that the 4th quarter hiccup is just that, and that Oakley should be back on track for 1997. (I think there may be another slight surprise as Rays' 4th quarter doesn't end until the end of January, and if they don't order a lot of new product, this might effect OO's first quarter earnings (which starts at the beginning of January).
The BIG issue is this: Has the market run away from sunglass makers? In other words, even assuming Oakley performs well, has the P/E multiple been lowered for the forseeable future? I think the answer is no.
If I'm right, when the sun comes out and second quarter profits are announced, all will be forgiven.
David |
