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pre-earnings market dynamics ?4

17:39 22-Apr-15


A subscriber asked, so I'll answer for everyone...

Do you have any comment about MVIS big movement today ?


My answer is that I see the same thing happening in several stocks, including MVIS and INVN.  The rebate rate is down significantly, while the stock price is up, indicating short covering.  That's somewhat common ahead of earnings, and I think in this case the broader market is also moving from fear of a major correction to fear of being left out, or caught short. 

For INVN, I think that short covering is all that's happening so far.  In my opinion psychological opportunity over an Apple Watch tear-down and fundamental opportunity for earnings remain untapped.  This is especially true in the latter case, given that my calculations on iPhone sales are very conservative compared to most analysts (45M vs mid to high 50s).

Where MVIS is specifically concerned, I was surprised that the stock didn't move somewhat higher on the initial news.  However, I think the market is starting to appreciate that there has been a fundamental change for Microvision.  If management provides evidence of good execution, the stock will graduate off my pick list and get its own section on the website, as I'll expect to be covering it for a long time.  On the flip side, as I've said before, good short sellers don't wait and hope, so I think that may be explanation enough for out-sized move in MVIS.  I would expect to see the shorted float down significantly over this period, though we won't get the data on that for another 3 weeks.

In the meantime, we're currently exiting the calm before the storm in terms of updates from me.  Expect more in the way of updates in response to various earnings reports for the end of April and early May.