This stock is going to come under more short presser now with this down grade. Investers that thought that $35 was a good buying point were sadly mistaken. Investers that fell in love with this stock are in for a real heartache. Maybe it is time to open your eyes and read the writing on the wall. Is this the best play in the smart grid game????
I beleive the short's hold on the stock may not be as short term as you think. The shorts will take this down and than ride it up and than take it down again. The old yo-yo effect. The only thing that breaks this effect are contracts and a sucessful sales team.
tarzan: the point of my comment was that the shorts can push the price down but it will only stay down for short periods of time because it eventually hits a price that is well below its fundamental value, at which point investors purchase and put pressure on the short side. I've seen several stocks that have exhibited this behavior in weak market conditions. As you stated, this is a cycle and that is why ITRI is a trading stock right now as opposed to a long term investment (just my opinion.)
Another scenario that can occur as a result of short pressure is that the price gets depressed to a point that makes the company an attractive acquisition. This happened with Atheros about a year ago when short interest was high, the stock price was pressured lower, yet ATHR was beating guidance each quarter. Qualcomm was able to offer a significant premium and still paid about the same price ATHR traded at 6 months prior to the offer. Companies like Cisco, IBM, and Oracle are investing in smart grid and may see ITRI as an attractive acquisition to gain the top spot in the market...but this is just pure speculation on my part.
Today's price is ~$29.70. The average estimate for next year's earnings is ~$4.00. That gives the company a forward PE of ~7.5. They generate $225M in cash flow per year and the international business grew 9% last quarter (yoy).
Perhaps you can suggest an alternate investment in the smart grid and provide similar numbers to justify why it is better than Itron?
The trouble with this stock is that the daily volume is low and the short position is relatively high. As a result, the stock can be manipulated down by shorts. Fortunately, that is a short-term affect. In today's market, ITRI is a great trading stock but a nerve-racking long-term investment.