How does a stock get back in the race? How does a company undo something that just happened? I had a terrific caller tonight asking about United Rentals (URI) to see if the stock is overdone after the company said May was soft. (URI is part of The Street's Growth Seeker portfolio.)
He was reacting to the fact that it had come down 10 points from where it was when the company telegraphed the soft numbers.
Just the other day, Bank of America (BAC) had cut the stock to a sell and given it a price target of $80, and he wanted to know if that was realistic.
The problem here is that, while I don't think United Rentals will go to $80, I also can't think of a reason why I would want to buy it right here unless the company reversed its forecast on the spot. That's because the reason why many traders "rented" United Rentals was because they liked the fact that it gave them heavy equipment exposure that was just American. If you bought the others, like Caterpillar (CAT) or Terex (TEX) or Manitowoc (MTW), you also got overseas and overseas is still not very good, with China being just toxic.
But the sentence, "It is fair to say that May is coming in a little softer than we had in mind at that point" (the last earnings call) is going to ring in people's heads until they say the utilization rate has improved, and I don't know how that will happen so fast. (For a better read of this whole thing, go read Bryan Ashenberg's excellent downgrade of the stock, as he knows it very well.) You have to hope, basically, that last week was fabulous for the business and therefore May finished strong.
Of course, anything is possible, and as Bryan acknowledges, these guys are fabulous operators. But still the prudent thing to do if you want to buy URI is to wait until the quarter's end, because I believe there will be many who don't want to show they own it because it was a domestic proxy that no longer works.
So my take, unless it falls to the mid-$80s -- not $80 -- I believe you may be too early and there's price and earnings risk and that's way too much for this guy.