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Technology Stocks : Harmonic Lightwaves (HLIT) -- Ignore unavailable to you. Want to Upgrade?

To: Gene Hooker who wrote (2876)	8/8/1999 9:20:00 PM
From: KM	Read Replies (2) \| Respond to of 4134

Some observations which might amuse you guys. I watched this stock trade on level 2 for several days last week, including the big reversal days. I had put it on as a short based on a potential top setting up on the weekly chart. I would estimate that less than 30% of the trades in this stock went off at the bid or even between the bid and ask prices. The tier sizes are very small (100 shares usually) and the spread can be huge, yet I saw the ask continually taken. It was almost as if there was no stock available and the hungry fish (buyers) were snapping up whatever chum was thrown their way. I saw the firms which cover this stock (such as CIBC) aggressively buying and not selling at all. On Friday, I covered the last of my short position at 80 about ten minutes before the close, as daytraders exiting finally hit me on the bid. Not two minutes later, someone slammed a bid almost 1.5 higher in there and the ask went up accordingly. If I had bought those shares at 80 instead of covering with them, I could have sold them for 1.5 gain in minutes. That's amazing considering that this isn't an internet stock. Anyway, I bought some calls on Friday a.m. to hedge my short position and still have them since I got out. I'm going to hold them because the way the trading went that I saw on this stock, I'd guess that a lot of people are betting on further upside, regardless of the tenuous state of the overall market and the fact that this stock has a parabolic near vertical chart pattern. Amazing stock, for sure. This is one I will buy on the dip.

To: Gene Hooker who wrote (2876)	8/11/1999 4:29:00 PM
From: Eric Jacobson	Read Replies (2) \| Respond to of 4134

Gene - you're not alone. It's easy to have doubts when a stock rises so far so fast and when the company is so dependent on one major customer. As someone else pointed out, the PE of 200+ is a bit misleading since it's based on trailing earnings of $0.36 comprised of quarterly earnings of ($0.07), $0.05, $0.10, and $0.25. You're probably better off looking at a PE based on this years' total earnings - currently estimated at $0.80. Since the price is around $82, this means they currently have a PE of around 100 based on FY99 earnings. The PE is only useful if you compare it to their rate of revenue and earnings growth. If they have 3Q99 revenues of around $40 million, this will represent QOQ revenue growth of around 82% compared to 3Q98. As someone else mentioned, it's easy for earnings growth to outpace revenue growth as long as the gross margins holds or expands and the company holds the line on expenses. Therefore, it's reasonable to expect the rate of earnings growth to exceed 100 percent. So, what we've got here is a company with a PE of around 100 that's growing at around 100 percent. Right now, there's no doubt that HLIT is a bit of a momentum stock. This isn't necessarily a bad thing - in fact, it's a good thing as long as they can continue to produce sequential increases in revenues and gross profit margin. Will they do this for one more quarter, or 10, or 20? I don't know. This is where the fear comes in, because it will likely get slammed pretty hard once one of these two elements is missing.