To: Melissa McAuliffe who wrote (1830 ) 4/16/1998 11:23:00 AM From: Clam Clam Read Replies (1) | Respond to
My thinking is this, Q1 is the riskiest time to hold VNTV due to seasonal reasons (and this year especially due to the EDS transition). They didn't preannounce and I trust the management team so I believe we are past the riskiest time to own the stock. Assume they do a few pennies upside (mostly on margin) and DSO's are up moderately. If the conference call enables analysts to raise estimates significantly, the stock will go higher and options would be the most leveraged way to play it. However, I don't get the sense estimates are going up (other than passing a penny or a few pennies through for the year if there is Q1 upside). If I were an analyst such as Upin at Robbie, I am sitting on an EPS ramp that goes $.12, $.17, $.23, $.29 (for a total of $.81 in 1998 - which is in line with consensus). Assume they do the high end of the streets' Q1 estimates (which is $.15). It depends on the call but you can figure that my new estimates would probably be something like; $.15A, $.18, $.23, $.29 for a total of $.85. So consensus goes to $.85 from $.81. Seasonally, Q2 is a good time to own VNTV as Q2 usually shows good acceleration over Q1. However, the big question is; does this get discounted during Q2 or after Q2 is reported (in July). I'm not sure. Therefore, I own the stock on margin rather than playing options. If I were to buy options, I would buy some that expire in the Fall - but you might be less risk-averse than me so maybe you just go for it in May. It's just a matter of time before VNTV's underlying biz re-accelerates and that is when you really want to own this stock so I would just own the stock and buy more on weakness.
