ALI - bright future in assisted living? Message Board

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Biotech / Medical : ALI - bright future in assisted living?

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To: Bob Zeleznik who wrote ()	5/5/1999 11:13:00 PM
From: kendall harmon	of 25

ALI-from Colonel77 on the Yahoo thread: There are two fundamental reasons why this stock is in trouble. You guys are forgetting that while this was somewhat of an over-reaction... it did deserve to get hit very hard (maybee not this hard but at least a 25% correction, minimum). Why? First, they declared that they will not make either this year's numbers OR next years numbers, this is a big deal for the not too short term. They are giving guidance that they will miss by as much as 25%!!! That's a big whack to their earnings. For the year 2000 they now expect somewhere between 1.40 - 1.60 vs. the expected 1.90. That is a very big disappointment!!! But that is just the hard numbers. You always need to factor in reputation and people putting their money on the line. On that issue you add some additional drop in price because they've failed to meet their goals for this quater, for the entire year, and they intend to miss them next year as well!! And on top of that, they failed to give any kind of warning as if this just hit them over the head last night. NO investor likes surprises. Premium multiples on stocks are often derived from companies that don't surprise (at least not to the down side and sometimes to the up side... like CSCO) This kind of big surprise, 25% as well as predictions by ALI that it will continue for this and next year are good reasons to see a 30%-35% correction. So, while some of this is overdone, much of it is not! I will wait for some rebound and then I'm out. Don't wed yourselves to a stock which is (1) having trouble keeping its occupancy levels up (2) has to revise its earnings down for almost 2 years; and (3) thinks its ok to surprise the market like this. By the way, the occupancy issue is also huge, but I think it needs little explanation... its what drives earnings for these companies, and that is one area they can't mess up.

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