Been following SKUL on the hourly and 30-min charts. It has been in an uptrend on those going back to last months op-ex, so for 1 month. Today it fell thru the bottom channel line of that uptrend and printed a low of 5.20 where buyers came in. The 30-min volume on that low was 138,900. The hourly volume was not much higher, 154,600. It closed the day off the low at 5.33.
I suspect it will continue a little higher on Monday to test the bottom uptrend channel line at about 5.36 and then head back down to test the $5.20 low. If it can get under $5.20 and close (on a 30-minute basis) with less than 138,900 then that may be a good long entry.
However, if it continues down then the next level would be 5.09 which was the low at the open on June 24th. That 5.09 had hourly volume of 155,166 and 30-min volume of 88,887 shares.
The AB=CD extension beginning with the high on July 17th at 5.70 as the A point, a B point of 5.30 printed this morning, and the C point at 5.46 also printed later this morning gives a D point of 5.06.
On the 2-hr chart it is getting well stretched below the 20-day MA which is currently at $5.52. It can get away from the 20 but it can't stay there....it will revert to the mean. The full stoch 14,3,3 is oversold on the 2 hr as well as the 1hr.
So, I need to see how it reacts at 5.20 and/or at 5.09. If it takes off higher Monday, then I missed the boat.
Managements big mistake was the European purchase of the distributor. The cost far exceeds any expectation of profitability in comparison to the 'distribution' agreements that could have been acquired instead. Truly disgusting in such a volatile time of the economy, but I do think they will pull through.
The same identical mistake was made by Brightpoint in Indianapolis, prior trading as CELL, that resulted in problems that brought the share price down with identical earning declines as SKUL. The only good news is that they were bought out @ $8/share from Ingram Micro. I know the management from both company's and as 'cool' as they are, they made some stupid decisions.
If anything, I could foresee a cell phone distributor or cell phone label make an offer for a buyout at around the current trading price. This would not result in good news for the shareholders, but that would depend on how steadfast they are on SKUL's potential long term.
Nonetheless, good luck and a personal message is that I am long and holding strong.
I'm not sure if this deal would have make or break implications on the company. It was $18m and they used cash from the IPO, not debt. While I suppose it could be argued that they would be better off making distributor deals as you say, I think the real problems came down to overspending as Mike mentioned and just a poor sales strategy. Both being addressed (or said to be). I got really long Skullcandy because of the strong balance sheet during a time when the market wasn't making new highs every day. I figured its a safe place to invest long term, rather than the over leveraged financials (which have since made exponential gains while Skullcandy PPS has deteriorated). I continue to sleep well at night however knowing that the downside is very limited due to the assets and balance sheet and the upside is unlimited depending on the success of the turnaround. I share Mike's thoughts about the valuation at $15, but my dark horse bet here for a potential suitor is Nike, for reasons which I will expand upon shortly.
Well said Todd. I could add the two "packaging resets", insiders selling and Andrus exit package, not being proactive to the over the ear high end market, an extra office with 30 employee's including all of the core executive team outside of the CEO, ineffective marketing strategy (as it relates to the mass market), complete in effectiveness of previous CEO to relate to the investment community....
Still long here. I'm on board with the takeover (although based on the entire management team it is likely a private equity deal - break up of the core 2XL, Astro and Skullcandy brands).
Hoby's handling of the "reset" which is going to run deeper then expected I fear and his "new map to profitability" and forward guidance will be key while they get the deal done before end of year. Hopefully holding off any significant price decay going forward.
Just my prediction...
BTW I am guessing 15 a share or 370 million buyout. That would be the range insiders stopped dumping shares. 3X payout on Hoby and Kyles (and the boards) recent purchases and more importantly their compensation options acquired last month or so...
Cheers OP, not much time to post right now but good to hear your thorough read of the ticker. I'm slowly getting to grips with some of this technical stuff. Much obliged. On a daily/monthly time frame, what signs would you be on the look out for to signal a break out of the trading range here?
I guess its just me and Wilson on this island. So, Wilson, do you want to hear a joke? Yeah?
There were these 3 #$%$s walking down the road and they came upon a road-killed rabbit. The first #$%$ said "I'm gettin kinda hungry, I believe I'll have that rabbit". And so he did and they continued down the road until they came upon a bloated #$%$ with its arms and legs sticking straight out. The first #$%$ said, "you guys go ahead, I'm full". The third #$%$ said to the second, "you go ahead I'm waiting for something better". And so the 2nd #$%$ feasted on the #$%$ and they continued down the road. All of a sudden the 1st and 2nd #$%$s barfed their guts out and the 3rd #$%$ said, "finally, a warm meal".