Shares of Cogent (COGT) Tumble on Barron's Article
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Shares of Cogent, Inc. (Nasdaq: COGT) are under heavy fire this morning after a negative Barron's article was released this weekend. The stock price has fallen about 12% on the article, down about $1.50 to $10.10 in pre-market trading.
The article begins by reminding readers how well shares of Cogent performed just after the stock went public: its IPO priced at about $12 and the stock quickly rose to $38 in a few weeks. Now that the hype has died down, the stock has fallen under the price level at which it went public, but is still trading at 32x future earnings.
The Barron's article, entitled "In Search of Cogent Growth", uses an anonymous hedge-fund manager to introduce a possible price target for shares of Cogent: $4, which would have the stock trading at about two or three times sales. According to the article, the manager is short the stock and says Cogent is not a growth story.
In 2007, with Cogent expected to report about 7% sales growth, the managers comment that it is not a growth play seems full-proof. Additionally, the article points out that Cogent's revenues are extremely dependent on interest income and the successful awarding of large contracts throughout 2008. Critics of the Company and the stock say that it is unlikely that Cogent will deliver its expected 26% revenue growth in 2008 due to these risky factors.
In contrast, this bearish sentiment seems to make up the minority of market players on Wall Street, according to the article. Analysts are relying on Cogent's industry-best biometric technology for fingerprints to help the Company outperform and out of fourteen analysts covering the stock, seven have Buy ratings on Cogent.
The Barron's article concludes by pointing out that Wall Street seems to be assuming that Cogent has already won a fair share of potential government contracts in 2008 and estimates could be considered high as a result. Such a claim would not be against the trend: in the last nine quarters, Cogent has missed Wall Street revenues expectations eight times.
The article begins by reminding readers how well shares of Cogent performed just after the stock went public: its IPO priced at about $12 and the stock quickly rose to $38 in a few weeks. Now that the hype has died down, the stock has fallen under the price level at which it went public, but is still trading at 32x future earnings.
The Barron's article, entitled "In Search of Cogent Growth", uses an anonymous hedge-fund manager to introduce a possible price target for shares of Cogent: $4, which would have the stock trading at about two or three times sales. According to the article, the manager is short the stock and says Cogent is not a growth story.
In 2007, with Cogent expected to report about 7% sales growth, the managers comment that it is not a growth play seems full-proof. Additionally, the article points out that Cogent's revenues are extremely dependent on interest income and the successful awarding of large contracts throughout 2008. Critics of the Company and the stock say that it is unlikely that Cogent will deliver its expected 26% revenue growth in 2008 due to these risky factors.
In contrast, this bearish sentiment seems to make up the minority of market players on Wall Street, according to the article. Analysts are relying on Cogent's industry-best biometric technology for fingerprints to help the Company outperform and out of fourteen analysts covering the stock, seven have Buy ratings on Cogent.
The Barron's article concludes by pointing out that Wall Street seems to be assuming that Cogent has already won a fair share of potential government contracts in 2008 and estimates could be considered high as a result. Such a claim would not be against the trend: in the last nine quarters, Cogent has missed Wall Street revenues expectations eight times.
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