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View Dave Davidson's Comments
Is China BAK Battery Just What the Hybrid Vehicle Market Needs?
CBAK definitely has bright prospects with a possible HPQ relationship and the continuing search for alternative energy sources, however buying shares of the company is like buying a lottery ticket. If neither of these possibilities come to fruition, the stock goes nowhere and may continue to erode, however if the do happen, the shares could easily triple or quadruple from this point with nearly 4.2M shares shorted. This stock definitely qualifies as a "mad money" investment and is not recommended as a core portfolio holding. I am long shares now and I'm waiting for a big move north on an HPQ announcement...however that announcement may never come! Good luck to all!
Mar 3, 2008. 08:06 AM
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Sprint Nextel's Internal Explosion
I would be cautious shorting shares of Sprint at these levels. The company is down more than 70% from it's 52 week high and has declined over 25% in the last week. While the company's financial performance more than justifies these reductions, significant future reductions are unlikely for the following reasons:
-The enterprise value of Sprint has fallen to just over $40B; $20B from debt (including the recent $2.5B loan) and $20B in market capitalization. At these levels, each Sprint subscriber is valued at just $950.00, nearly half the amount that Cingular paid for AT&T Wireless in 2004.
-CEO Dan Hesse "kitchen sinked" the 2008 earnings forecast and set expectations to near ZERO expectations. If they are predicting a loss of 1.2M subs in Q1 and Q2, I would expect something less. He has replaced the old leadership team and instituted a "back to basics" play book which overtime will significantly improve customer satisfaction and retention.
-The company borrowed $2.5B to pay off maturing debt and provide liquidity beyond the $2.2B in cash they currently have on hand. Since this transaction will be used to pay maturing debt, it will not increase the amount of debt outstanding. In addition, the company eliminated their dividend which will save approximately $300M annually, further improving the company's liquidity.
-The value of the company's spectrum alone is worth well in excess of $20B. Just look at the bids from the companies involved in the latest government auction for proof.
-An announcement regarding the future of WiMax and possible investments from Intel are rumored to be coming the following weeks.
-Much of the incremental selloff of Friday was due to the overall market being down over 360 points at one point. Shares of Sprint actually held up well on Thursday and only moved down of Friday after the credit rating downgrades.
Overall, the business outlook for Sprint for the next 3 quarters does not look good, however most of the bad news is baked into the shares. The stock could see an incremental 5-10% downside if the overall market sells off this week, but I would be cautious in opening short positions at these levels. If you do, I would stay close to my computer to ensure I would be able to quickly cover my position should any positive reports about Sprint come out. Right now all the sentiment is bearish...that's normally when you get a reversal.
Finally, I doubt the company will be acquired in the short term, but the prospect of that happening will keep the shares from totally tanking.
Good luck to all investors. This is a tough market!
Mar 2, 2008. 10:56 AM
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