Explain Ktel......
fnews.yahoo.com
HOW COULD YOU HAVE SEEN IT COMING?
In April's Daily Double we pointed out how inefficient the market had been with K-tel. The company had announced plans to go online as early as February, yet the stock, like a record needle stuck in a vinyl groove, went nowhere for two months. Apparently, for every good underreaction there is a definite overreaction as well.
Once the stock got moving it was an accident waiting to happen. As the shares rose, a few small analysts like Key West Securities' Anthony Elgindy and Stock Investor Trading News' Louis Riley climbed aboard to sing the praises of K-tel. The meager float made it an easy tout. Riley correctly pointed out the short squeeze, with dumbfounded short-sellers having to cover their positions only to drive the price higher in the process, but it was a bit of a self-fulfilling prophecy. By talking up the prospects, just as Elgindy had an amazing overnight change of heart on the company (going from a pre-split $5-7 a share price target to $30-50), he was helping create a long-favored scenario where demand would outweigh the limited supply.
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Message 4132714
WHERE TO FROM HERE?
Key West Securities, a market maker, issued a bearish take on K-tel a few days into the rise. "When the hysteria dies down and the volume dries up, the stock should settle to a more appropriate range between $5 and $7," the firm's chief analyst Anthony Elgindy noted. "This could happen very quickly based on earnings and book value."
The next day, after apparently taking into consideration how ill-placed that last remark was in light of the market valuations of the profitless CD-Now and N2K, Elgindy retraced his steps and retracted his words. K-Tel was now the "best value" among its competitors, and, despite the sector being overbought, Key West issued a "buy" rating with a $30-$50 price target. I did mention Key West was a market maker, right?
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Why the FLIP FLOP???? |
