“I might own SCOX at some point, but for now I’d be inclined to
stay on the sidelines since it looks too early to buy into the
story. For the time being, I have a negative bias on the stock
until it reaches a more attractive entry level. The stock has been
quite volatile recently, and I expect more volatility for a while.
It broke a key level of support around $13.5-ish, establishing a
downtrend and putting in place a 5-month top. SCOX is looking to
test the next important area of chart support–at around $8.5 to
$9–so, I would hold off starting a long position for now.“Longer-term, it’s possible that the stock could reach the
low-to-mid $20s in the next 12 to 18 months. But a solid up-move in
SCOX would depend on a number of factors: increasing Linux adoption
rates, growing IP licensing revenues, and the outcomes of various
pieces of litigation SCO has pending with other companies
(specifically award and/or settlement amounts). If these things
happen in SCO Group’s favor, then it’s possible the stock price
could move up into the $20-25 range — which represents around
15x-16x the consensus’ fiscal year 2004 EPS estimate of
$1.62…”
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Manager’s Journal: IT Investor’s Journal: A Close Look at Red
Hat(Feb 10, 2004)