Everything that could go wrong did go wrong:
1. Eliminated the dividend
2. Cut FY2016 guidance to negative earnings
3. Missed quarterly guidance on EPS by a couple hundred percent and showed a loss
4. Miss quarterly revenue by a mile
5. Had a costly recall on the brakes i.e. a SAFETY RELATED recall
6. Heavy institutional put buying the whole time after earnings and almost no call buying
And all because an insider bought 10,000 shares, and a family member increased their share in the 13G it rallies 66%. This stock should be $6 right now.
Everything that could go wrong did go wrong and the stock is rallying. ACAT go the best of me. I'll leave it to all you to figure this POS out. GLTA
Safety related recalls are a killer! And ACAT doesn't have the cash to pay it. What a lie the CEO portrayed during the conference call that the reason they cut the dividend was to invest in future growth. They knew when they were spewing these lies that there was this recall about to happen. They needed the cash to fund the recall effort that could be $10 million or more. Unbelievable.
These puts expire in 5 days, and the stock has to fall to $12 to break even. When this news about the brake recall hits the wires, the stock is going to crash.
Hazard: The brakes can fail, posing a risk of injury or death to the operator.
I've never seen anything like this. The stock should be down 50% right now! Why this news hasn't hit the wires is beyond understanding. The liabilities here are unbelievable.
The recall news has not hit the major wire services yet. It's not on CNBC, Marketwatch, Yahoo Finance. It's not announced yet. Could easily be a $10 million cost. The brakes on their snowmobiles are failing causing potentially fatal crashes. Get out now!
Now we no why the puts have been trading, and thestreet just downgraded ACAT to sell. Recalling snowmobiles due to failing brakes! Major liability risk. Time to hit the sell button big time.
I don't know why no one seems to have noticed the Nikkei has fallen 12.5% in 3 days. Shanghai market has been closed all week due to the new year festivities. The stories about capital flight out of China have been running rampant all week. When that market finally opens on Monday, I think it could fall by 10% at least. If that happens, the DJIA and SP500 are going to blow through their January lows and be down 1,000 points on the Dow at least. I think Monday is setting up for one of the worst days in the market ever!
This morning you can see the open interest increased from 1500 to 2000, so it wasn't people selling positions, it was people adding new positions. Something is going to happen that is negative in the next 6 days.
This was a $115,000 trade on something that expires in 6 days and has to move tobreakeven and profit. Lot of premium to pay for 6 days unless you are confident it will move.
Even today over 500 $15 strike puts traded that expire in 6 days, and no calls traded. Break even on the trade is $12.75. So they are expecting a lot more to profit. People still expecting a crash to happen very soon.
You'll get your chance again. ACAT is losing to Polaris. Their snowmobile sales are flat but ATV was down like 43%. All those Chinese imports of 4 wheelers make this whole space a loser in my view. When you can buy a 4 wheeler for $900, who cares what the book value is....can't make money. Polaris wins by innovating new products and they are best in class....look at their stock. These businesses are very challenging and have major structural problems. Zacks reiterated its strong sell rating just two days ago. That doesn't happen if there aren't deep problems.
It's a total disgrace that the company (1) eliminated the dividend, (2) has negative earnings forecast for the year, and (3) has significant revenue declines for the year, and the market has not eviscerated the stock as it should have.
Throughout this whole run-up this week, the put options that expire in 2 weeks have been purchased heavily. There has been almost no call buying during that run-up in price. Yesterday was the first day there was even a fraction of call buying, maybe 300 contracts, versus 1600 for the puts. People are still betting heavily that this stock will fall a lot in the next two weeks.
I've never seen such insanity. I've honestly never seen a company in my life eliminate a dividend and get rewarded with a 66% stock rally. It's incomprehensible. Stock should be below $10 based on the news right now. Unprecedented activity. People are still buy February puts though. I still think this one is going to crash.
CEO's take note, there is a new formula for corporate success. Lose money, shrink revenue, and eliminate your dividend. Your stock will rally 66%. Never seen anything like this.
Well this is one of my trading styles. Look for opportunities where the stock price moved incorrectly relative to the news. I didn't get in short until it rallied substantially off the low of 8.90, but obviously I'm down from where I got it because it rallied more. Just gonna let the process play out. It's worked a lot of times before.
This is total insanity for a stock with negative earnings, significant declines in revenue, and suspension of the dividend. This is exactly what happened with Sanderson Farms, Commercial Metals and others, but wow this is some serious short covering. You never think it's going to turn, until it does. If it follow the same pattern, ACAT will easily be below $8-10 in 1-2 weeks. They fade back to the price around earnings pretty quickly.