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EMC - The World's Ugliest Tech Stock?

Sorry for mucking this site up with financial data, but I thought this was interesting since it was VMware's parent company... a company on a spending spree acquiring other technology companies as of late.

Quoting from Schaeffersresearch.com

Wednesday morning, EMC Corp.outlined its strategy for sustained double-digit revenue growth and reaffirmed its outlooks for both the second quarter and the full year. But the stock reacted negatively to the announcement, which leads me to ask: is EMC the world's ugliest tech stock?

One thing is for sure. EMC certainly does not lack competition for this dubious honor. I've spent plenty of time in this space advising against overloved, underperforming technology issues such as Cisco Systems, IBM, Yahoo!, and of course, Microsoft.  In fact, all four of these stocks are currently held in my Schaeffer's Master Portfolio Short.

But one can certainly argue that EMC takes the prize. The stock dropped nearly two percent after yesterday's news and is following that up with another dismal performance today to peg a new annual low. Price action has been horrible on the stock from a short-, intermediate-, and long-term basis. The shares recently dropped beneath their 80- and 160-week moving averages and are just two points from single-digit territory.

Since suffering a 95-percent haircut (or should I say "shearing") off the bubble burst of 2000, EMC has shown little upward momentum. What's more, the stock has continued to languish beneath its 80-month and 160-month moving averages for the last half-decade.

Sentiment indicators are staggeringly bullish despite this dreadful technical backdrop. Out of 19 analyst ratings, 14 are "buys," with nine "strong buys" in the mix. Short interest is trifling at just 0.63 percent of the equity's float with a short-interest ratio of 1.09 days to cover. In fact, the number of shorted EMC shares declined last month by more than 11 percent.

Options players are likewise lined up in the bullish camp. Schaeffer's put/call open interest ratio (SOIR) for EMC weighs in at 0.26, which is lower than all but three percent of the past year's worth of readings. The bulk of EMC's short-term open interest resides at out-of-the-money calls. There are currently almost 64,000 open contracts among the July 13, 14, and 15 strikes.

Finally, EMC's market cap remains hefty at $28 billion (which implies that its cap at the 2000 peak was well over $200 billion). All of this adds up to a stock whose ticker symbol could stand for "Exercise Massive Caution."

Read the original article, here.

Published Saturday, June 10, 2006 11:08 AM by David Marshall
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