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Technology Stocks : GenRad Inc.(GEN) entering the ADSL market!
GEN 25.74+1.1%Nov 7 9:30 AM EST
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To: Jeff Clegg who wrote (27)3/14/1997 4:52:00 PM
From: Ford Investor   of 283
 
Jeff, I see an enormous amount of pressure on Genrad to report huge earnings in the quarters to come. I base my thinking on these factors:

1) The Zack's earnings estimates for the current quarter are $0.32 and for the current fiscal year is $1.33. Since they revised their earnings estimates to come in at $0.20-$0.25, that is why their stock has taken a beating in the last couple of days. I saw the stock drop all the way down to $12 and almost hit $15 in 2 days! There has been obvious manipulation by insiders on this stock. They would buy like crazy at $12, sell at $15, then they would short it to its present level.

2) Genrad claims that they will meet analyst expectations in the quarters to come with a Zack's estimate of $1.33 for the year. First of all, since they are reporting less than expected earning for the quarter, that affects the whole year. They will need to beat analyst expectations for the 2nd, 3rd, and 4th quarters to justify their claim that they will meet their earnings targets. This is very difficult to do even for the best companies out there.

3) Obviously, Genrad is banking on a huge contract in the future. This European tool is vital to their overall growth for the year. If they do not win this contract, they will fall below analyst expectation of earnings for all the quarters to come. There is alot of uncertainty here and risk.

4) By examining the call and put options for the past several months, I have formed an Excel spreadsheet illustrating a increase in the amount of put options. This can serve as anothjer indication as to what lies ahead. Based on my data, there seems to be less confidence in the company lately.

5) There seems to be too much competition here to justify a solid base for Genrad's earnings outlook. You say that they are competing with 6 other companies for this European tool. That gives them a 14% chance of getting the tool. Are they going to do both hardware and software for this tool? Will Genrad own the tool? Is the company's employees ready for more work in the future and able to meet the customer's timing demands? Alot of question needing to be resolved here.

Any rise in the company's stock now can be considered to be manipulation. There is alot of downside potential here until they start to clarify how they will meet the earnings. Until then, it would be a good idea to stay away from this company for now because there is no expected growth at the moment. I would be interested in any other additional comments from anyone reading this posting. Good luck investing.
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