Medifast diet (med) and Medicare link

July 28, 2004 -- I've been watching this stock for a little while now. I saw it drop down below $4.00 after news that its annual earnings projections wouldn't be met and I'll give it my best shot to share my thoughts about this company at its current price.

As with any stock near its annual low, it's always fun to envision that company returning back to its annual high. In this case, the 52-week high of $18.75 is substantially higher than today's closing price, making for an interesting situation as $18.75 is over 5 times higher than the stock's current price.

I've done some research and went back to see what drove this stock up to $18.75 and why. I did this mostly through old news releases and message board posts just to get a general feel for investor sentiment at the time and to see what, if anything, had materially changed about the situation of the company.

Here are my thoughts. The market was doing well, this is a low float stock, and optimism about a company with a growing product drove this stock to new highs. The fact that MED traded above the $10 range for a matter of several months shows that the company had staying power in that range. It seems that the general optimism in the market at the time, positive exposure for this company (this stock was mentioned in IBD and I also came across a positive article on thestreet.com), growing sales, and a general trend in today's society for weight-loss and well-being are all factors that drove this stock to its previous highs. There may have also been a possible short covering situation as many who'd bet against this stock reaching such highs were either forced or scared into covering.

In hindsight, it seems that investors jumped the gun on this stock, which led to a correction. Here we are in the $3.50 range, way off the highs of last winter and considerably lower than the $5-10 range the stock has traded at for quite some time before this.

With the Medicare announcement Medifast is staged to make a 10 to 15 dollare recovery this fall.





This article courtesy of http://www.takediet.com.
You may freely reprint this article on your website or in
your newsletter provided this courtesy notice and the author
name and URL remain intact.

Did you find what you are looking for? If NOT.. Try google.

Submit Your Article