CPNE took quite a drubbing today after the company came out with Q4 and full year guidance.
Personally, I believe the sell off is pretty ridiculous, and people are selling in typical knee jerk reaction. Anyone who has been following this stock for the last year along with me knows every time this stock has sold off violently it ended up being a great buying opportunity. The last time the company announced quarterly earnings, the stock dropped from about $1.60 to $1- what a buying opportunity that was.
I was half right in this past Wednesday’s BLOG entry when I predicted this sell off after the numbers came out. I thought the stock would run up higher on Wednesday, and I was wrong there. However, I was completely dead on about the post numbers sell off.
This is an event you can put in your experience file and remember it the next time a similar opportunity comes up. Anytime a stock runs up into an earnings release or some other anticipated event, it is nearly almost always a selling opportunity before the fact. This was no exception.
If you are wondering if this party is over, consider the following: CPNE will deliver $.18 EPS in 2006. Also, consider CPNE delivered zero EPS in Q1 ’06, and $.03 EPS in Q2 ’06. Therefore, CPNE delivered $.15 in EPS in the second half of the year.
Even if they move along at the same clip, they will deliver $.30 EPS in 2007. This suggests a much higher priced stock.
Here’s what the market didn’t like. There was $.07 EPS in Q3. Therefore, there must have been $.08 EPS in Q4- not as much growth as we would like. However, we have no idea if there were some non cash charges, and cash levels could have been considerably higher at year’s end.
I have a high level of confidence Q1 ’07 will be very strong. Someone wrote in it would be $.10- I don’t know where they got that information.
Nevertheless, this sell off is heaven sent for anyone looking to get more involved. Here’s the chart:
This only goes back a few weeks to the sub $2 level. It’s pretty short term. Therefore, thinking short term, I believe this stock is a good buy at $2.875, and a screaming buy at $2.50. New SSL- $2.25. I will update the table on the left hand menu bar of the home page.
I still believe this stock is destined for $4 plus and a NASDAQ listing. This pullback could be shallow and short lived.
Comments and questions are welcome.
I wish I would have sold on Wednesday. I would have made a fortune.
I actually see 9.5 cents for Q4. I base this on the statement that fully diluted earnings are 18 cents for the year. The 9 months fully diluted earnings thru 09/30/06 were 9 cents per share based on 6% less shares outstanding. The additional 6% shares would have reduced the weighted net income by .5 cents.
The numbers I am using are from the September 30, 2006 10Q. The weighted average shares were 55 Million for the 3 months ending and 51 Million for the 9 months ending.
Editor: Making it an even better buy. Remember this day, and sell some the next time you see a stock run up into an event.
Are you expecting the stock to pull back all the way to $2.50? Has the company actually said anything about pursuing a Nasdaq listing?
Editor: I’m not expecting it. As I said in the BLOG, the pullbacks will be shallow and short lived. I felt we would only see a 38.2% retracement. About $2.870. However, if it does happen, it will be a screaming buy. That was the point. The company has stated they intend to pursure a senior listing. However, it is my prediction it will end up on NASDAQ.
Stan: Don’t be concerned. You’ll get a good chance at that fortune. What I hear you lamenting is not selling at or near the top. I suggest that we all take to heart a statement by Bernard Baruch, on of the great investors of the 1910-1930′s. “I never bought at the bottom and I never sold at the top, I just took a big hunk out of the middle and made LOTS of money.” I think there is a “big hunk” of the midddle left and it will get bigger in the coming weeks. I would also counsel everyone to consider Lao Tzu’s teaching:
From the Tao Te Ching:
When the world’s on the Way
They use horses to haul manure.
When the world gets off the Way
They breed warhorses on the common.
The greatest evil: wanting more.
The worst luck: discontent.
Greed’s the curse of life.
To know enough’s enough
Is enough to know.
Lao Tzu; #46,
(Translated by Ursula K. Le Guin She has done one of the finest jobs on the works of Lao Tzu, a twenty-year task that captures the poetry and meaning of his works. As beautiful a translation as I know.)
There is going to be enough.
BD
Editor: I don’t think we are even at the middle yet.
Clearly “buy on rumor sell on news” and so I took the liberty to add 50% to my position in the $2.75.
I also think the EFund may also have sold their position causing a temporary drop.
The odds are in our favor that this stock is going to rise to a 52 week high.
Scott
Editor: Good move. Definately a “buy the rumor, sell the news” scenario. New highs are also new all time highs.
Did you sell into the runup and will you be buying on the dip?
Editor: I sold 5,000 shares at about $3.40, and I would buy more if the stock were to drop back to $2.50. However, I still own over 200,000 shares I have been holding for over three years, and I am more of a seller on the surges.
well, it reached that $2.5 (screaming buy price)…. what do you think of this post earnings sell off – pretty harsh today.
annual report should be coming soon..
Editor: I am informed some stupid sellers filed to sell about 1 million shares under 144. Looking into it tomorrow. In my opinion, Q1 will be a blowout. I strongly recommend buying on this meltdown.