ORCT

[VikingFan]

ORCT was my pick in the stock picking contest.  Unfortunately, it spent most of the month consolidating the large bounce back from the sharp selloff on false rumors at the end of October.  Fortunately, this consolidation has allowed significant accumulation by long-term investors, including new "buy" coverage by CE Unterberg Towbin and the Oberweiss December newsletter and reiteration of the "buy" from the one analyst who previously covered ORCT, RBC's Daniel Meron.  Longer term, this consolidation is good, as it transferred shares from the short-term traders to the long-term investors, and established a good base for the next leg up.

On Friday, ORCT closed at 22.15, crossing back above the 50-day moving average and posting a new closing high since the blowout earnings.  It's too bad the stock picking contest ends on Monday, just as ORCT is starting to break out from its consolidation, and it's too bad the next contest is delayed until Dec. 12.  If it doesn't move up too much this week I'll probably submit it again for the next contest.  Notice in the P&F chart below the target is 41.50.

Here is what I wrote for my contest entry:

Orckit is an Israeli company that sells communications equipment internationally.  Since transitioning to focus on "Triple Play" communications gear, they've only had 1 main customer, KDDI in Japan, which allows a service provider (i.e., telecomm or cable) to offer voice, data, and video together across networks.  Here's a businessweek article discussing how the "Triple Play" is the big trend in the industry:  http://yahoo.businessweek.com/investor/content/nov2005/pi2005114_7121_pi044.htm

In July, ORCT fell from over $28 after guiding Q3 EPS to .23 vs. analyst estimates of .25.  It broke its uptrend and subsequently drifted down to the 20 area ahead of the Q3 report.  On 10/21, it broke 20 support and on 10/24 made a new low at 17.77.  After a bounce, on Thursday, 10/27, ORCT broke that new 17.77 support, triggering stops and massive selling.  Rumors circulated about them losing their one customer, Israel being attacked by Iran, or them missing EPS badly.  On record volume of over 3.5 million shares, ORCT sold down as low as 12.22, $7 below the previous close.  In retrospect, that was a climactic, capitulation panic selloff.

On Monday morning, 10/31, ORCT announced blowout earnings of .30 (excluding a one-time capital gain), well above what analysts had predicted before the selloff from over $28.  In addition, they mentioned they had begun shipments to a U.S. telecom carrier, though no revenues were included in the Q3 report.  Also, they upped Q4 guidance to .41 vs. .33 estimates, resulting in full year guidance of $1.11 (excluding the one-time gain).  They upped 2006 guidance to $1.50, more than 35% growth over 2005.  On the conference call, they indicated that these numbers were based only on existing customers, and any new customers would be addtional to these estimates.  They also hinted at several potential new customers, particularly in Asia.  Finally, they announced that they'd paid off all of their debt.

So ORCT dropped from $28+ down to $12.22 after disappointing guidance, and subsequently blew out the original estimates while mentioning a new U.S. customer (not yet formally announced separately nor reflected in earnings) and upping guidance significantly, yet the stock still sits under $22, almost 25% lower than before all of this improvement in fundamentals.  The jump from 12.22 back over $20 in just 2 days attracted a large number of shorts.  Despite the jump, ORCT has consolidated in the 20-22 area the last week.  With the capitulation selloff behind it, many new shorts who will have to cover, and fundamentals pointing to a much higher price, ORCT looks like a tremendous bargain.  Even a conservative 30 PE on 2006 earnings for the 35% growth would put ORCT at $45, more than double the current price.  Any new customers would increase those numbers.  With a recent history of being very conservative on guidance and then blowing out estimates, ORCT has huge upside.

Many analysts from many firms were on the earnings call, but only one (RBC's Daniel Meron) has been covering it. That one had a target of $34 before earnings, and likely will increase that substantially after the large increase in guidance. Other firms should initiate coverage soon after establishing their position.

[VikingFan]

You can see from the chart above that the bounce-back rally in early November was repelled by the 50-day EMA, which has served as stiff resistance over the past month.  On Friday, ORCT finally broke above the 50-day EMA, clearing that resistance and triggering a stong buy signal. A MACD buy signal can also be seen, indicated by the crossing of the MACD lines on the way up at the bottom of the chart.

Combined with the new multi-month closing high, these signals point to the start of a nice rally on ORCT.

[VikingFan]

ORCT trading at 23+ this morning, well above the previous intraday high of 22.36 on 11/1.  Breakout confirmed if that holds.

[VikingFan]

09:45 ORCT Orckit Comms: Checks indicate recent changes in Japanese market may provide opportunities for ORCT - RBC (24.32 +2.17)

RBC says their industry checks indicate recent changes in the Japanese market may provide opportunities for ORCT to win additional business in 2006. Specifically, the planned NTT network and service convergence starting late-2006 for wireless unit NTT-DoCoMo and regional units NTT-East and NTT-West plays to the strength of ORCT's offering. Also, firm says ensuing competition, mkt dynamics, and regulation may further expedite carrier shift to convergence, opening more opportunities for ORCT and other vendors. (Briefing.com note: This comment was out pre-mkt.)

[VikingFan]

http://biz.yahoo.com/ap/051205/orckit_mover.html?.v=1
Orckit Shares Advance on Analyst Report
Monday December 5, 1:41 pm ET 
Orckit Communications Shares Climb After Analyst Notes Coming Business Opportunities in Japan


NEW YORK (AP) -- Shares of Orckit Communications Ltd. jumped Monday after an analyst noted coming business opportunities in Japan for the communications networking equipment maker.
The Tel-Aviv, Israel-based company's shares rose $1.75, or 8 percent, to $23.90 in midday trading on the Nasdaq. In the past 52 weeks, the stock has fluctuated between a low of $7.18 and a high of $29.55.

RBC Capital Markets analyst Daniel Meron, who rates the company at "Outperform" with a $34 target price, wrote in a client note that recent changes in the Japanese market may mean more business opportunities for the company in 2006.

Specifically, planned network and service convergence by Nippon Telegraph and Telephone Corp. "plays to the strength of Orckit's offering," he wrote.

Ensuing competition, market dynamics and regulation may "further expedite carrier shift to convergence" in Japan, leading to more opportunities for Orckit and other companies, the analyst added

Meron said some of the opportunities may materialize next year, but added it is not clear "when deployments will commence and on what scale."

Orckit's products, he wrote, were evaluated by several Japanese carriers for many months. The analyst cautioned clients that "sales cycles may stretch and test investor patience."

Besides opportunities in Japan, Meron added he also sees potential in Europe and Korea for the company as carrier competition grows.

[VikingFan]

ORCT broke out to a new 2-month high again today on good volume.  I guess nobody else here is interested in making money on a great, undervalued growth stock with strong technicals?

[VikingFan]

Despite the Israel market dropping 6%, ORCT rallied over 7% after gapping down on the Sharon news, creating a bullish engulfing candlestick and closing over 25 for the first time in 3 months.  After consolidating for a month, it looks ready for another leg higher.

ORCT nearly hit 30 in July when it only had one customer.  Since then, they've added Wiltel as a customer, blew out earnings, increased guidance, and opened offices in Korea and India, indicating possible new business in those countries. 

[REALDEALS21]

Great chart here, also, I heard that they are about to announce a BIG contract with someone. I am in.