Plan for the future on the earnings call sounded pretty weak for the 10 of us listening to it. They brought in a lady who worked for Pampers who is going to change the product line and restore growth. Coin flip on that one.
They beat sales this qtr by cutting into margins hard. I would give these guys a meak outlook.
Be weary of sell-side analyst. Their motivation is future deals with companies. Most of a shop like Needham's money comes from taking a cut of deals for small - mid-cap companies like this one. The trading revenues slice of the pie for the sell-side is disappearing fast (and pales in comparison to fees from deals).
Take what Needham guy said with a grain of salt. The market isn't; but we'll all see in 6-12 mo's. I'd watch the stock for the next week or 2 and then short.
"Take what Needham guy said with a grain of salt. The market isn't; ...."
Really? The stock price movement yesterday seems to indicate otherwise.
Growing sales is important to capture market share and show that there is more growth out there to capture. Flat or decreasing sales is the kiss of death - you can go look at what happens to companies who reported declining sales this past earnings cycle - it ain't pretty.
Increasing margins by cutting costs and increasing efficiency are things which can be more easily done as it is a matter of process. So, investors/analysts are willing to give a bit more leeway on that. They see that the company has made progress with increasing sales and that's half the battle.
The bottom line earnings numbers had been hampered over the past 12 months due to the goodwill writedown, and that is now coming off. As business picks up during the next couple quarters both top line sales and margins are going to continue to improve. Increasing retail sales numbers were put out by the govt yesterday, and that's also going to help fuel things.
Did the CEO tell you on the call what the primary focus is going to be? Increase shareholder value. They bought shares in November in addition to what they hold, and they want those to get back to what they were valued at previously at $6 and higher.
As far as the conference call and who was listening, I listen to quite a few calls and this CEO was one of the best. He was very open about everything, what they were doing, what the plans are. The fact that he stayed on for an hour and discussed everything that the analysts wanted was commendable in my eyes.
Unfortunately for you, that $4 strong buy from Needham is only going to be there until the next earnings release and conference call - because you're going to see them raise that price target to $6 or $8 at that time once there is more confidence around the approach.