Jolted by a sub-par Q2 earnings report ($.02 short of estimates), and lowered guidance for 2007, the stock retreated to a mid-day low yesterday of $34.15. That gave VLCM longs 10 down days in 12 sessions. The stock was 33% off its recent high. Yikes.
Despite year-over-year quarterly earnings growth of -4.8%, bulls are pushing VLCM back into the 40s today. Shares are up nearly 12% today to $40.46. Still a steep fall from a pre-earnings high of $51, but buyers like the margins (profit 13%, operating 19%) and return on equity (22%). They also like a forward P/E of just 20 and a 25% gain in revenues. The stock seems to be repeating last year's activity, when a poor Q2 report sparked a selloff, followed by a rise that led to an all-time high five weeks ago. At some point, the Co needs something to get it over the wall, whether it's a killer product or superstar spokesperson or something else. Until then, the stock will find its comfort level and trade sideways.
VLCM longs are devoted to the products and lifestyle. It will be very tough to convice new buyers to join in when there are a ton of other growth stocks that have raised guidance to the street. Will some longs sell into strength above 45, or even 40? Possibly, but should they hold their shares, the question is how does the stock draw new buyers?
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