For some time I've been trying to analyze both from charts and fundamentals
just how high the first "spike" will take us assuming, of course, that contract
announcements do come to pass. The analysis immediately demands an assumption of
prevailing market conditions.
(1) If the contract is, for example, ~ $100 MLN to be satisfied within one year, and the profit margin is 25% then the contract would yield about $1 per share. Now if the market were optimistic and uptrending at this time, a P/E of 25 would not be unreasonable, pegging the price at $25 per share in a year's time. BUT there are many debts and dead horses to pay off, not to mention long suffering investors who may be anxious to realize their first profit or merely recover their original investments. I think, in this case, the price would perhaps break the old 2 yr high of 10 1/4 and go to 15 with a further retest of 10 1/4
(2) If the market mood is bad and stocks are making new lows, a lot of investors may need the profit to prop up other holdings, and Valence might dissipate itself around 7-9, settling there to await more news or a better market.
(3) Obviously, that first sipke will depend very much on the size and time frame of the
contract. Of course many of the investors here are not interested in the magnitude of
that initial surge because they intend to hold. I am, however, because there are some
debits that I wish to satisfy, and I want to do it in the most profitable way. I'm sure there are others here with that same objective.
Appreciate any thoughts, different figures, or corrections.
Pallisard |
