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Wednesday, May 24, 2006

Downgrade Alert - EAG

Long Way From Profit Here in Penny Stock Pick we rate penny stock by news, market potential, insider, financial statement and technical chart. The average rating of the stock is then used to determine how we would recommend the stock from Strong Buy to Strong Sell. After noticing continuous negative trend on the stock, we are updating the rating on Eagle Broadband Inc. (EAG), the League City, Texas based broadband service provider to government, military and corporation. After seeing share price dropped to historic low of 3 cents per share in May, the company issued a 1:35 reverse stock split on May 15 from 5 cents per share to $1.75. Although the stock has went almost doubled to as much as $3.85 per share, since then the stock has been on a slide to $2.27 per share or 6 cents before the reverse split. Recently the company has been working on demostrating the company to financial analysts hoping to give the ananlyst more confidence. However looking at the following details of the stock it's really hard to imagine we will see any positive things going very soon:

Technical
Although he technical chart shows some positive as K line is on top of D line, since both 50 day and 200 day moving averages are still falling the stock is still in a bear market which is why we see another sell-off after the stock touched 50 day moving average. Unless MACD and signal line can rose back and stayed above 0 for a while, we will not see any big positive rally going.

Insider
The insider transactions still show negative sign as both director and intitution have been selling stocks lately. The sale of stock of the director was in this month with 1 million shares.

Financial
The latest quarter report show the company has generated about 34% less revenue in the quarter ending in February of 2006 compared to same quarter of previous year. However net loss has been cut in half as operating expenses has been reduced due to job cut and restructuring. In addition since the cash level is still declining the company may need new financing or to sell stock to maintain a healthy cash level.


Penny Stock Score (1~5) 5 is highest
1. Market Potential(broadband): 3
2. News: 3
3. Technical: 2
4. Insider: 1
5. Financial: 2
Recommendation(2.2): Sell

5 Comments:

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