Howie: When I first heard the news on Friday I thought "19". I was pleasantly surprised to hear that it had traded after hours at $26. Some poster in the Zoo say it has traded at $19 on instinet - but it looks like they are just troublemakers.
Sometimes, after news like this, the trading after-hours turns out to be too pessimistic, and the actual range is a pleasant surprise. That never seems to happen with the PIG though, the surprise seems always to be on the downside. Remember after the Mason-CSFB statement - instinet was showing $37 but in fact it went to $35 that day and $29 after.
Thinking positively, the washout from $51 to $41 and from $41 to $31 must have accommodated a good part of the bad news. Those commentators who forecast $24 for Monday probably glanced at its 52 week low and took that as a stage-post. Fact is nobody knows.
If it was going to the high teens, it might be worth dumping anywhere above $25. Unfortunately, they don't tell us in advance.
There are lots of reasons for sayng that $23 would be the bottom, or the closing price bottom after it has maybe dipped to lower than that intraday. But I can see a scenario where it will, finish up at $27.
This would require analysts to hold off on adjusting 2Q-4Q estimates until they have more information - you would have to wonder how they could make new estimates on the little information contained in the CPQ warning It might entail the street, in general saying, this is a different and bigger and more profitable company than 1Q 1998, therefore the bottom should be higher than last year.
When Kumar said, a couple of weeks ago, that earnings would be 20 cents he reiterated his BUY and explained this on the grounds that the reduced earnings was already in the share price and considering its prospects, the shares were now a BUY at the then prevailing price in the low $30's. Maybe he will want to go against the grain again tomorrow and reiterate that view. I would not be surprised to see estimates from some analysts revised down but BUY recommendations reiterated or upgraded. CPQ in the $20's is a 6month or 12-month buy -everybody knows that.
I realise that 15 cents is not 20 cents but I would think that most analysts will privately believe that the real earnings when announced will be nearer 20 cents than 15 cents.
Just a few ruminations. |
