ALU is again on shaky grounds and I am concerned that ALU may be heading back to $1-$1.25 range. It broke down support of $2.58 last week. It will find another support at $2.0 before it starts its downward draft to $1.09 again. I’ll be watching $2 support carefully, if it falls through the cracks, that won’t be good news to longs.
Looking historically, since 2000, ALU has mostly been in downward trend. 2004 run up gave some hopes to investors but that was it. Since then stock has been mired by Management problems and Economy. And it touched all time low of $1.09 in March 2009 with rest of market. Run-up from March to Oct was impressive when stock gave 5bagger.
In last couple of years ALU won several major contracts including NTT DOCOMO, China Mobile & several others. But stock has done worse and worse, making several investors wonder – what is going on?
When company announced its earnings recently this Quarter, stock plunged 11% in international markets. Economy and component shortages are to be blamed for missing revenue expectations & wider losses.
Company has several deals in back-pocket to be not overly concerned over growth. But company needs to execute better to meet its growing demand, management was overly concerned over economics to squeeze operations. Recovery in economy has took whole telecom industry by surprise and ALU is not the only one falling short to meet customers demand. ALU is getting punished because it could not improve margins in low interest rate environments. Management is not managing company resources everywhere. Company has ample cash, but it makes me worried if management is not executing well. ALU balance sheets are too bad for investors to digest that company should enjoy any good price premiums.
Overall I think $1.25 is remote possibility, but I won't rule out fall to $2.0 this summer where it could be good accumulation price
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