Okay, let's say mm manipulation is not as powerful as folks out there thought, and RDWR is down due to valuation reasons. Can you provide a solid (NOT a RANDOM number, say, low 20's) analysis to convince folks in this board that RDWR is not worth even 42, but only 30 or 22, etc.
Since you're in the business for 21 yrs, I am willing to trust your analysis, if your analysis is indeed trustworthy.
why? because hes looking like a schmock having pushed the stock down the retail and institutional clients of his firm only to see it plummet 50%..hes trying to hype it up again- to no avail , obviously. he raised his target to $85 when the stock was at 80 on nov. 3rd...this is why u dont trust an invetment banking analyst..since the stock made a tremendous run and obliterated his previous target of $60 he was left with 2 choices: 1) downgrade the stock 2) raise the price target of course he chose 2, because of the banking relationship with the company, ssb still wants to do the secondary...and trust me guys, a secondary will come, probably within the next month or two..dont forget, the company only got $18/share in the ipo..theyll do a secondary for 25-30 ..u can bank on it...and thats why the analyst never downgraded the stock, when they should have,had they been objective. when that secondary comes in, well, i guess it would be hard to make even the paltry 25c/share for 2000...dilution, dilution live and learn
well, first of all i like the challenge in your question. heres a way to try and get to a reasonable valuation: rdwr's mkt value is about $633mm as of the close today. look at ffiv, its mkt value is about $2660mm (fully diluted) ffiv's sales growth rate as seen in the last qtr released is roughly 4 times rdwr's. since no analyst is basing his valuation on earnings with these companies i contend that rdwr merits only 1/4 of ffiv's mkt cap only based on the sales growth parameter. that makes it about $665mm. lets go further in the analysis, as rdwr is losing money and ffiv is making money already i contend that ffiv deserve a further premium over rdwr, furthermore, since analysts now expect only a 10% increase in sales from 3qtr 1999 to 4thqtr 1999 in rdwr , i contend that that premium should be significant. as any mkt maven will tell u, ffiv deserves further premium just on account of it being a larger cap stock(cant help it, theyre in vogue these days- i dont agree but i never fight the tape). i view a 33% discount as a fair one for these 3 items and thus i arrive at a fair mkt cap of $443mm for rdwr based on these assumptions and facts. that translates to roughly $30/share. now, i truly believe the stock has been hyped dramatically ahead of earnings due to the blockbuster numbers posted by ffiv..everyone expected them to come with a huge number, certainly a profit and they did not. also, all the news about the deals with lucent etc. had been leaked long before the actual releases...all that generated a speculative bubble that burst the day the qtr results were released and has not mended itself yet. the mkt over reacts to the upside and will over react to the upside too, thats why i believe the stock will continue to go down below my percieved fair value of 30...i will be buying more in the mid 20's and low 20's if the mkt(nasdaq) will over correct and flush out the poor shareholders that bought this thing out of pure hype. hope that answers your question
Thanks for your both analyses (good ones!). Sounds like a very dim future for RDWR. If it dips to 25-30 something and you get in, what do you expect its future price target, i.e., do you plan to be Long and riding it back to 50's or even higher (if you believe it will), or get in around 25-30 for just daytrade?
--If for daytrade, what difference it makes if you get in at 28 or at 43? I have been long for over 1 month (lose big $$), and I started daytrading RDWR 2 wks ago using a different brokerage account (made almost 50% loss up already); Plus, if, indeed, it gets to 25-30, daytrade opportunities would for sure be gone;
--If you plan to be long after getting in at 25-30, you must have some confidence (or a new set of analysis) on the future of RDWR, right?