Maidenform Selloff Appears Excessive (MFB)

Maidenform Brands (MFB) announced that FY 2005 results would come in shy of analysts expectations. The company expects 2005 net sales to range between $381 million and $383 million. They had previously projected sales to range between $385 million and $390 million. Analysts on average were expecting $387 million in net sales. This is shy $9 million or 2.3%, based on the high end of the company’s original projection and the low end of the current projection.

The company also revised its 2006 net sales growth projection to a range of 5%-7%, down from 7%-10%.

MFB dropped over 19% yesterday on this news. If you consider that the market fairly valued MFB with the shares trading in the range of $10-$12 with the expectation that the company would match its original projections, you would consider it outrageous that the stock lost so much in Thursday's trading.

This is a clear example to me of the market overreacting and sending a stock price tumbling. The news of the company dropping its projected 2006 net sales growth by 2%-3% and the existing drop in 2005 net sales of 2.3%, should not be enough to cause MFB to shed 1/5 of the market cap of the company.

I believe the current drop is fueled by strong speculation and short selling interest in the market. I believe this is what also creates valuable purchasing opportunities. I will keep a close watch on MFB and I will likely take a position in MFB if the market continues to push the price of the stock down below $8.

MFB 1-yr chart:

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