Obviously this stock has been a disaster since the earnings report. I personally think the price movement is quite a bit of an over reaction to the earnings news. Shorts are clearly in control for now but it can't continue forever. What are you guys thinking here? Maybe another positive sales report for August will cause a reversal that could make shorts cover and we can head back up? After basing for so long around $1.90 I'm a bit shocked by what's happening here.
I'd like to get some real opinions here instead of the usual nonsense on this board. Thanks in advance. Good luck everyone.
(Full disclosure: long at 1.95 since before earnings. Bought half of my intended position before ER with the intention of buying the other half later depending on the price movement. I'm looking long term here. I'm not a trader. And here we are at 1.43...yikes.)
Risky stock + less than stellar earnings report + overall market down + international crisis + shorting + panic selling = APP dropping PPS. Only hope for the short term is a good August sales report. That would stop the current bleeding and bring back some buyers IMHO.
I have had APP on my watchlist and I have traded it since the low 0.90s.
I jumped back in at $ 1.60 with half position, and I am looking to buy more on the way up or down.
In my opinion we could see it back to the 1.25-1.35 range, which is where I am looking to add to my position.
As long as the sales are still rising the long term upward trend is intact. If the string of sales increase breaks the trade is done.
These short term swings are in reaction to non cash numbers that distort the bottom line.
The stock rose after the second quarter numbers last year.When the third quarter numbers were released the rise in the value of the stock over the period of the third quarter added an expense 12.663 million due to the unrealized increase in the value of options.This turned what would have been a loss n the neighborhood of 7-8 million into a 20 million dollar loss.
The drop in stock price after the numbers were released meant that there was an 11,219,0000 addition to the bottom line in the fourth quarter.Instead of showing a 6 million dollar loss the company showed a 5 million dollar profit causing the stock to spike.
The run up in the stock caused the value of the options to run up meaning that the change in the value of the options made the loss look significantly bigger than it actually was in the first quarter.
The drop in the stock price added 5.4 million to the bottom line and would have sent the loss down to around 5 million from 15 million the prior year, but the early repayment of debt caused the reported loss to more than double into the 37-38 million range.
The good news is that anyone who knows how GAAP accounting works knew what was coming before it was reported and should have at least had an inkling how this stock should react from it's history.
The charge for the repayment of debt has moved the option swing out one quarter.If the sales rise only 5% for the quarter and the gross profit only rises to 6 million instead of a a 12.6 million dollar expense due to the rise in the value of the options there will be a gain.If the stock is at 1.67 there will be a gain of 5.5 million,if it is 1.42. Third quarter should swing from a reported loss to a profit.
Great post, Dogma, thanks. I feel like the warrant value fluctuation and its effect on the bottom line are a catch 22 situation that should be ignored. Aren't the warrants a non-cash obligation? I thought that when the warrants expire, they'd be realized as equity in the company and that 2 people from Lion Capital would join the APP board. Am I totally wrong here?