Wednesday, November 28, 2007

Zacks keeps sell rating and reduced price target to $3

Two days before the shareholder meeting and following S&Ps and BofAs $3.5 and $3 targets, Zacks reduces its 6-month price target to $3.

The key reasons include:

1. Lack of business momentum and declining GMs.
2. Not expecting profits till 2010. Company financials do not reflect the anticipated synergies from the restructuring activities.
3. Possible default of convertibles.
4. No near term growth elements.

I agree with the near term profitability picture as losses of 41 and 28 cents are expected for Q4 and Q1 but I would disagree with the declining GMs (these are set to go up from 10 to 13% and improve in 2008), no profits till 2010, default on convertibles, and near term growth elements (need to check bookings and new wins). I do agree with the financials not reflecting the restructuring activities because these won't be felt until Q1.

Hopefully, the current low shareprice and reports like this will spur management to make significant structural changes and make tough choices that they have not done in the past. If so, then we can look at these months as the bottoming phase and look forward to the long-awaited turnaround.

1 comment:

Anonymous said...

Well... what were the answers???
Tim you kind of represented us the shareholdrs...