TruthSeeker Report: Cacheflow (CFLO)- Exploring the meaning of the Analyst Consensus “HOLD” Rating
Before CFLO’s projected Sales, for this Feb 14ths Quarter ending report date, where slashed in half by a company earnings warning, the overall analyst’s prediction for end of 2002 year stock price was $14.64 dollars. To put that into perspective, the close of market today was over a full dollar above that long-range projection by the Analysts. That projected number not updated YET to reflect the massive Sale Revenue shortfall disclosed today. Specifically, the change in the projected 43 Million Sales figure being reduced to 20 Million, by Cacheflow’s CEO today
Its certainly reasonable to think that the current conditions and new disclosures will cause downgrades. Meaning a further pushout Cacheflows’s elusive dreams of profitability. The current Analysts rate as a whole Cacheflow to be a “HOLD”. Given that Cacheflow has just halved its revenue and faces continued competition from firms offering equivalent products, the outlook for Cash Flow to Cacheflow is very stark.
Here is the number crunching and the means how I come up with this projection. The data is from the ACE Consensus Report via multex.com
A. Yearly Earnings Forecasts Apr 2002 EPS = 0.60
[note that this is way way up from the April 2001 Yearly Earnings Forecasts of (-.25), there clearly is a missing link between there to 2002, but lets be Darwinian
B. Total outstanding shares= 40,105,000
C. Current Analyst Consensus Estimates (ACE) Fiscal 2002 = 24.4
Now for the scary part…something that many fear and loathe---“Doing the Math”
EPS multiplied by Shares = Earnings
.60 times 40,105,000 shares = Analysts projected 2002 earnings of $24,063,000
P/E multiplied by Earnings = Price
24.4 times $24,063,000 =$587,137,200
Price divided by shares equals Analyst projected stock price.
$587,137,200 divided by 40,105,000 shares = $14.64
Since we are using the number from 2002 the stock price is forward calculated to that timeframe.
So the consensus of Analysts indicates that the stock should be at $14.64 at Fiscal close of 2002. Over a dollar above the close today. Without taking into account the significantly diminished and changed landscape for Cacheflow caused by its failing Sales Revenue announced today, for the average investor the logical conclusion of an investment in CFLO derived specifically from the Analyst Consensus figures is “DEAD MONEY”
Given that the Analysts will update their ratings, the more likely scenario is that CFLO’s stock price target will be lowered below the current prices. Looking at the 2002 estimates and how unrealistic the current environment makes their likeliness, TheTruthseeker would guess the new Targets would be around the 3-5 dollar level in the very near short term. (Realistically the Analyst ratings will likely say stuff like- “Long Term De-Accumulate” or “Available to Generate Funds”)
Again this does not consider CFLO’s current missing by 3 country miles, on projected Sales Revenue of 50% of the 40 million, just announced today. Not even close to the Ballpark, very distant would need big telescope to find, really real nothing in the Ballpark,
Now some rough estimating of Cash On Hand.
As of October 31 2000 Q2 Net Cash Flow was ($38,240,000)
As of October 31,2000 Total Current Assets was $139,055,000
Bonusing up the current quarter to reflect the significant sales shortfall and taking into the prior quarters actuals a reasonable estimate of the Q3 Cash Flow would be ($50,000,000)
Applying that loss to Total Current Assets (some of which may not be liquid) leaves a total Assets of 90 Million dollars. Given a sustaining burn rate, and taking into account the current economic conditions, these numbers imply that Cacheflow will not be able to make Payroll after 2 more quarters of activity.
Granted that conditions can change, layoffs, sales of assets, and other means of keeping the boat afloat, but all of those efforts would impair CFLO’s ability to gain the marketshare it promised their investors and analysts.
So in the face of it formidable competitors and the realities of making money and paying bills, it seems that CFLO is destined to either go out of business or seek to raise additional capital via dilution of current shareholder equity to say viable. Since the prospects of additional Sales coming in to save the day have been severely hampered by the CEOs shocking update today CFLO seems to be facing a harsh reality of The Street. CFLO must walk the fine line of keeping the gears turning in a Technological rat race, which requires constant cash to sustain it, and that of simply sustaining itself through the now clear slowdown with enough capital and resources to survive in the completive market in late 2001 and 2002.
It’s the TruthSeeker opinion that VCs and Individual investors will not come to the rescue of this failing company. Good money will not chase the bad. Therefore the TruthSeeker states that he would sell all his own CFLO shares and salvage whatever value was within them before the explosion of the Feb 14th earnings date and Conference call. The TruthSeeker will also advise his dear Mother to do sell her shares of CFLO to protect herself against unreasonable risk. It’s the right thing our Nana too.
Feb 14th may be your sweetheart’s special day, but for Cacheflow, it seems to be shaping up to be nothing less than the kiss of death, dotcom style.
The Truthseeker
--------------------------------------------------------------------------
Provided below is some data from the ACE report found at multex.com
Tracked by 8 Wall Street professionals, CacheFlow stock is considered a "Hold." The weighted consensus ranking or AQO of the company is 0.65. This is within the .35 to .749 AQO range deemed to correspond to a "Hold" ranking. Considering the AQO of the S&P 500 is now at 0.78, the shares are considered to be less attractive than the general market as defined by the S&P 500.
Losses are expected to decrease for CacheFlow in 2001 if analyst’s forecasts are accurate. Currently, a deficit in the area of $-0.25 per share is forecasted, down from $-3.31 per share last year. For 2002, analysts expect a profit, with per share results in the area of $0.60 considered likely. Earnings of the S&P 500 are expected to advance approximately 3.63% in 2001. At this time there is no estimate for the S&P 500 for the year 2002.
CacheFlow is expected by analysts to report losses of $-0.07 per share for the third quarter. There has been no change in Wall Streets' outlook over the last month, indicating analysts still expect an improvement over the prior year loss in this quarter of $-0.64 per share. Analysts have a very high level of confidence in the forecast of earnings for the company. The deviation in the estimates that form the consensus is very low and any significant variation from expected results could have adverse price consequences for the shares. |
