Geospace plunges after $29M contract put in doubt


Geospace (GEOS -15.2%) client Seafloor Geophysical (SGS) has informed the company part of a prior capital commitment has been withdrawn, and that it's seeking new investors. (8-K)

As a result, Geospace may have to postpone delivery of a $29.4M order for 2.3K units of its deep-water OBX seafloor recorder beyond its June quarter (FQ3). Geospace isn't able to estimate when delivery will now take place.

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Comments (9)
  • Bigdog3004
    , contributor
    Comments (78) | Send Message
     
    Ouch. Is it time to buy the dip?
    21 Mar 2014, 04:56 PM Reply Like
  • Hamdy Sadek
    , contributor
    Comments (221) | Send Message
     
    I though I did two weeks ago, but I guess I was wrong. The sell off today was really irrational considering all of the fundamental data.
    21 Mar 2014, 06:12 PM Reply Like
  • seekingthetrooth
    , contributor
    Comments (854) | Send Message
     
    I commented in the latest article that there were too many risks. I sold my position at 84. I was looking at a dip in the 50s after next ER but this was unexpected.
    22 Mar 2014, 01:24 AM Reply Like
  • Hamdy Sadek
    , contributor
    Comments (221) | Send Message
     
    I don't know the real reason behind the sell off today, in just one hour the stock dropped more than 16% I wish someone can explain the real reasons why something like this happens. If GEOS has lost a sales opportunity of 29Mil which is less than 10% of their revenue, does it justify losing 16% of their market value? I find it hard to believe there is no other logical reason for such stock price drop except that of course Mr. Market was upset today.
    22 Mar 2014, 01:51 AM Reply Like
  • seekingthetrooth
    , contributor
    Comments (854) | Send Message
     
    Its about the certainty and timing of future revenues. Regardless of whether this contract was fulfilled, the picture is bleak in terms of revenue and EPS growth. With a revenue model based on securing contracts in a market that is going through a cyclical downturn amid competitive pressures from regional and local players in the international market, at best GEOS is worth 50 dollars or less.

     

    Valuation is still running ahead of fundamentals. Won't be surprised if over time this goes to the 20s or 30s. That would be a nice entry point.
    22 Mar 2014, 11:44 AM Reply Like
  • Hamdy Sadek
    , contributor
    Comments (221) | Send Message
     
    Thank you for the reply, your analysis makes sense as to why the sell off happened. I tried looking for your previous post that mentioned above but was unable to find it. I was a bit shocked when my stop loss was triggered around $66 shortly before the market close. I have a diversified portfolio but still realized a reasonable loss into my 100 shares small position.

     

    What was really alarming to me was the fact I did not see this one coming, and I did not see the warning signs when most reviews I read about this business were over optimistic and fundamental key figures seemed reasonable. Live and learn.
    22 Mar 2014, 12:03 PM Reply Like
  • jmalmo
    , contributor
    Comments (3) | Send Message
     
    I am not surprised. I think SGS is now direct competitor in this segment. I can't remember if this represents the entire contract. I am long GEOS and think this drop is a buying opportunity.
    23 Mar 2014, 10:37 AM Reply Like
  • jmalmo
    , contributor
    Comments (3) | Send Message
     
    I am not surprised. I think SGS is now direct competitor in this segment. I can't remember if this represents the entire contract. I am long GEOS and think this drop is a buying opportunity.
    23 Mar 2014, 10:37 AM Reply Like
  • bodark
    , contributor
    Comments (2) | Send Message
     
    I think this may be tied to the current tensions with Russia, and it may be that the lost investor was a Russian, based on the timing.
    3 Apr 2014, 07:21 PM Reply Like
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