Except for America Online and Iomega posting large gains, this was a rather slow news day. The rest of the week promises to be more exciting, though, as more earnings reports start rolling in. Reporting later this week are America Online, Cisco Systems, the Gap, and several other key retailers.
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America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AMER)") else Response.Write("(NASDAQ: AMER)") end if %> advanced $5 1/4 to $67 7/8 today, partly in anticipation of earnings to be reported on Wednesday, and partly on announcements and rumors du jour. For one thing, it was reported that America Online would enter the Japanese market later this year through a joint venture with Mitsui <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MITSY)") else Response.Write("(NASDAQ: MITSY)") end if %>. Internet services would be offered in the Japanese language. America Online didn't comment on this story, but the Kyodo news agency predicted over a million subscribers within two years. Alex Brown reiterated its strong buy rating for the company.
Detection Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DETC)") else Response.Write("(NASDAQ: DETC)") end if %> popped up $2 7/8 to $15 1/2 after announcing that its TriTech Pet Immune Security Detector was selected by Westinghouse <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WX)") else Response.Write("(NYSE: WX)") end if %> to be the standard in all its hard-wired home security systems. The product's key feature? Its highly-sophisticated technology can tell the difference between a malicious intruder and Fluffy, your cat. Westinghouse expressed an interest in maintaining a long-term relationship with Detection Systems, which expects to sell over $2 million of its TriTech product each year.
In the middle of last week, Tseng Labs <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TSNG)") else Response.Write("(NASDAQ: TSNG)") end if %> reported losing more than twice what Wall Street expected in the last year -- $0.07 per share -- this compared with earning six cents in the year-ago quarter. And shares fell accordingly, to as low as $8 3/8. But today they rebounded sharply, up $3 to $11 7/8, partly in anticipation of Tseng's new ET6000 graphics and video controller chip. Janney Montgomery Scott analyst Manda Dagata feels the chip has "a lot of potential", offering more bang for the buck than its competition.
QUICK TAKES: ZENITH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZE)") else Response.Write("(NYSE: ZE)") end if %> continued its amazing run, rising $7 1/8 (45%!) to $22 7/8 in the wake of deals announced with US Robotics <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: USRX)") else Response.Write("(NASDAQ: USRX)") end if %>, Cisco Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CSCO)") else Response.Write("(NASDAQ: CSCO)") end if %> and Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MSFT)") else Response.Write("(NASDAQ: MSFT)") end if %>. Will the company re-name itself "Z-net" now? . . . Great Lakes Chemical Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GLK)") else Response.Write("(NYSE: GLK)") end if %> set off a hostile bidding war for NOWSCO WELL SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NWSLF)") else Response.Write("(NASDAQ: NWSLF)") end if %> over the weekend when it topped BJ Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BJS)") else Response.Write("(NYSE: BJS)") end if %> for the oilfield equipment and service concern. Nowsco shares rose $1 3/4 to $23 3/8. . . Specialty-chip manufacturer IMP INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IMPX)") else Response.Write("(NASDAQ: IMPX)") end if %> continued to push ahead, rising $2 1/2 to $21 3/4 on the prospects of sales for its "Zip chip", a device used to make Iomega's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IOMG)") else Response.Write("(NASDAQ: IOMG)") end if %> Zip drive. . . . Not to be outdone, IOMEGA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IOMG)") else Response.Write("(NASDAQ: IOMG)") end if %> itself rose $6 to $66, largely on rumors that Zip drives will be incorporated into future IBM Aptiva PCs.
Universal Stainless & Alloy Products (NSADAQ: USAP) crashed $2 3/8 to $9 1/8 after the company revealed that it would only make $0.15 EPS in its next quarter due to "market volatility." Oppenheimer & Co. took the opportunity to drop the stock from "buy" to "market perform", and snipped fiscal '96 estimates to $0.85 EPS and fiscal '97 numbers to $1.60 EPS. However, Universal has high hopes for the second half of this year, expecting results "to be far stronger than those achieved in the first half of the year." The optimism is based on delivery of power generation products which had been "on hold" amid uncertainty in utilities regulations.
Cygnus Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CYGN)") else Response.Write("(NASDAQ: CYGN)") end if %> got slammed for $2 11/16 to $18 1/4 by Hambrecht & Quist analyst Alex Zisson, who downgraded the stock to "hold" from "buy" after stating that the company had a "terrible track record of execution". In addition, Wheat First analyst Patricia Bank raised estimates for the company but downgraded it to "hold" from "outperform", based on share price. Two weeks ago the FDA recommended that Cygnus' smoke cessation patch, Nicotrol, be allowed to switch from prescription to over-the-counter status.
Harman International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HAR)") else Response.Write("(NYSE: HAR)") end if %> filed a "shelf registration" today, in order to issue four million additional shares. Investors, probably worried about the value of existing shares being diluted, sent the stock tumbling down $2 7/8 to $47 1/8. According to Wall Street Words (keyword: WSW), a shelf registration is a "simplified method of registering securities that permits corporations to file a relatively uncomplicated registration form with the Securities and Exchange Commission (SEC), and over the subsequent two years, issue the securities. Shelf registration is supposed to provide more flexibility for corporations when raising funds in the capital markets."
QUICK CUTS: Shares of VALUJET <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: VJET)") else Response.Write("(NASDAQ: VJET)") end if %> continued to crash, down $2 1/2 to $18 1/8 after the airline released news on Friday that its April load factor fell to 61.8% from 74.6% the year before. . . Not enough people were dialing up MOVIEFONE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MOFN)") else Response.Write("(NASDAQ: MOFN)") end if %> to check out what was playing at the theaters in the last quarter; the stock fell $1 7/16 to $5 1/8 after it lost $0.07 EPS in the last quarter compared to $0.08 EPS the year ago. Soon you'll have to cash in two shares just to go to the movies. . . Ethical drug developer FOREST LABS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FRX)") else Response.Write("(NYSE: FRX)") end if %> got smashed this morning when it missed estimates of $0.52 EPS by two cents, forecasting lower earnings for the first two to three quarters of fiscal '97 as it expands its sales force. Shares dropped $3 7/8 to $41 7/8
FOOL ON THE HILL:
Brighter Teeth, Whiter Stock
The burbling of the market has propelled many stocks to and fro today. Names familar to Fools the world around, like America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AMER)") else Response.Write("(NASDAQ: AMER)") end if %>, Iomega <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IOMG)") else Response.Write("(NASDAQ: IOMG)") end if %>, IMP Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IMPX)") else Response.Write("(NASDAQ: IMPX)") end if %>, Zenith Electronic <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZE)") else Response.Write("(NYSE: ZE)") end if %> and Zytec <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ZTEC)") else Response.Write("(NASDAQ: ZTEC)") end if %>, all lurched forward on heavy volume, the strong simply becoming stronger while the weak fell aside. Amongst the names familiar to assiduous readers of the message boards is Ion Laser Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: ILT)") else Response.Write("(AMEX: ILT)") end if %>, until recently just another industrial laser concern.
What is up with this slingshot, up from a mere $5/8 in the past 52 weeks to its current heights of $26 3/4? Cosmetic dentistry, or to be precise, a laser that can be used by dentists in conjunction with a $100 pack of chemicals to burn teeth white. The company believes that it will have as many as 200 tooth-brightening lasers sold to dentists this fiscal year (by March of 1997), making fat margins off the chemical packets in a razor-and-blade fantasy that sends investors into apoplexy.
With 3.9 million shares outstanding, Ion Laser is still a relatively small concern, worth only $104.3 million even after it rose $3 5/8 today. The "float", or shares publicly available for trading, is an even smaller 3.3 million, essentially meaning that only 33,000 investors in the world can buy a round lot (100 shares) of the stock. This makes for some pretty volatile gyrations, as anyone who has followed the stock lately has discovered.
Basically, if you look at Ion Laser from any classic value standpoint, you take your own sanity in your hands. With $3.9 million in trailing revenues, the balance sheet is similar to a train wreck. The stock has ebbed and flowed past the point of profitability for the last five years, making $0.09 EPS in 1990, $0.07 EPS in 1991, $0.04 EPS in 1992, losing $0.16 EPS in 1993, making $0.04 EPS in 1994 and finally losing $0.07 for the last reported fiscal year, 1995. With a 65 cent book value, the stock trades at 41 times book with no price/earnings ratio at all, as the trailing earnings are a negative five cents per share.
25 times sales? 41 times book? No price/earnings? Numbers like these make America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AMER)") else Response.Write("(NASDAQ: AMER)") end if %> look like a low P/E play. The story with Ion Laser Technology is a forward-looking one. With only 10 to 15 laser centers running as of the end of April, the simple fact is that investors have seen none of the revenues from the new cosmetic denistry business kick in. The Brite Smile laser is nicely positioned, offering white teeth for about $500 to $1000 in treatment costs with $135 of that being a packet of proprietary chemicals that give them $100 in gross profit.
Ion Laser Technology's unit combines an argon and CO2 laser and reportedly gets out even the deepest coffee, nicotine or tetracycline stain. They are currently the only company to combine both lasers into one unit at a price that can be called even remotely reasonable. For more information on what people who have had the treatment think of it, you are best off going to the company's web site at http://www.britesmile.com and sifting through the pile of testimonials.
Louis Navellier picked up the stock in his newsletter while a number of small boutique brokerages have started to add this fast-moving equity to their stable, including Tom Hesick of Securities Research and Analysis -- a guy looking for $0.50 EPS this year and $4.00 in fiscal 1998. Emerald Research, of Iomega <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IOMG)") else Response.Write("(NASDAQ: IOMG)") end if %> fame, also appears to have gotten behind the company as well, with the Pennsylvania Merchant Group also initiating coverage. The Penn Merchant numbers are looking for $0.53 EPS in fiscal 1997, while our Foolish analyst Wesley0428 on the message boards has come up with $0.76 EPS, with some extremely detailed accounting, in the message board.
All this attention is fairly new, however, as the stock only recently left the ranks of the Emerging Companies (EC) class of companies on the American Stock Exchange. What this means is that institutions were barred from owning it until April 19th, when it got approval to go to Tier One on the AMEX. Before this, the stock was not marginable at all firms and also could not pass the muster of many "blue sky" provisions (state securities laws). Ownership prior to this day was strictly limited to individual investors with a mind to take on quite a bit of risk. One of the more interesting elements to the Ion Laser Tech story is that one institution was willing to take on that risk -- a group of investors gave Ion Laser $5 million to buy shares at $15 a pop with an option to purchase an additional one million shares at $20 in a private placement.
Skepticism is still rife in the dental community, a profession that has been beset by more than its fair share of quacks in the past 20 years. Due to the growing legal hostility towards physicians, most malpractice-minded dentists will probably need a strong recommendation from an established source before they go whole-hog into laser dentistry. The recommendation of one of the leaders in the industry, like Dr. Gordon Christensen, would make what is an uphill battle a downhill slide. This laser procedure is not approved by the American Denistry Association and could leave many practitioners felling queasy.
But Ion Laser Tech actually is a little bit more than cosmetic denistry -- in October of 1995, United Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UTX)") else Response.Write("(NYSE: UTX)") end if %> bought 200,000 shares of the company after their Pratt and Whitney division entered into a strategic alliance with Ion to develop lasers and composite materials. The way the deal is structured, Pratt gets to use anything developed for industrial purposes while Ion gets to have first crack at the medical and dental markets. Potential applications for cured composites in the medical and dental field would be new types of fillings.
Ion Laser has already surpassed its competitors, Premier Laser <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PLSIA)") else Response.Write("(NASDAQ: PLSIA)") end if %> and Biolase <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BLTI)") else Response.Write("(NASDAQ: BLTI)") end if %> in market cap, but neither company has anything near what Ion is peddling. Although I have been quite impressed with the numbers that Wesley0428 has crunched in the folders, as well as with the professional opinion MF Buldog (a practicing dentist who is buying the equipment himself) has introduced, MF Quest's testimonial is probably the most interesting factor, as she has had the procedure done herself.
As far as more detailed information on the company, I have to defer to the message board -- they have done some exquisite work out there. My only comments come from a valuation standpoint -- at a $100 million market cap, if this company is for real, that is tiny. In all honesty I am waiting for the next quarter's numbers to be released to get a sense of whether this is hype or there is any follow-through. I realize that reported numbers trail reality, but the simple fact is that *if* this is for real the stock could easily double, and the only way to tell if it is for real is to either work for the place or look at next quarter's numbers. With very little institutional ownership at this point and earnings about a month or so away, I think a Fool would be content to wait.
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