Why IDTC is near it's 52 week low:
IDTC became profitable back in 1997, and this combined with extreme excitement about their number one position in IT drove the stock to $40. Then in April of 1998, the FTC and congress began investigating the possibility of regulating and taxing IT. This news sent the whole IT sector, (NSPK, VOCLF, FTEL and others) into a down spin all the way till October. Even though IDTC is mainly a telcom, it was most widely known as an IT play, so even though their earnings kept increasing with skyrocketing revenues the stock fell into the mid teens in sympathy with IT. The most amazing thing about this, is that as far as I understand, IDT will not be vulnerable to a regulatory tax like other ITs because IDT's technology originates the call with a regular phone line unlike others like Vocaltec (VOCLF) whose IT is all over the internet. So, basically IDTC dropped from $40 to $15 for no good reason!!
I have heard it suggested in my extensive reading that investors may have been reacting to the possibility that calling cards may eventually become obsolete, (not likely to happen for some time, IMHO), and IDT's number one revenue source is currently prepaid calling cards. I have also heard it suggested that AT&T's announcement last year, that they were going to enter IT may have scared investors, (not a real concern, IMHO as they are so far behind IDT and so big and slow that they may never catch up).
Whatever the reasons, they don't seem serious enough as to cause a fall from $40 to $15.
Reason For Recent Lows: A few weeks ago IDTC pre-announced a .10 cent hit to current quarter's earnings. Several analysts cut it and lowered earnings estimates to .06 from .16. The stock hit 9 1/2 in one day and popped back up to $14-16 in about a week. The reason given for the earnings shortfall was that vendor and operations delays in the deployment of their network caused them to have to use much more leased capacity and spot services than expected. The problem will be corrected in 2 or 3 quarters. Also, the money they have been dumping into the internet side of the business has been causing a drain on margins. This will be solved by the eminent IPO/spin off. IDT has also hired some very experienced new mgmt to help speed up network deployment.
The jump back up to current levels from the 9's is probably due to all the excitement about the internet news forthcoming. IDTC has been on Steve Harmon's ISDEX for more than a year. They have huge internet potential and you can still get in on the ground floor, unlike as you all know, most internet stocks.
IDTC has a book value of 10 1/2, $6.50/sh in cash, a asset/liability ratio of almost 4 and a debt/equity ratio of .046. At 16 1/8 with such huge internet potential I see VERY little downside risk, and I look for the low 20's in 1-3 months and $30 b4 Y2K.
All IMHO Do your DD's
Bill Z |
