Plenty of ASX stocks remain overvalued compared to existing revenue. This deal is good for so many reasons, outside of revenue.
The biggest being validation in an Asian market, being a tough market to crack. But I’d rather address the large number of people scratching their heads on why it dropped on such good news.
To me this is as obvious as it gets and the good news is that it’s not something that can last forever. The simple reality is that traders who bought between 40-60c in the first 2 weeks still have not been fully cleansed and are also very upset. No one likes losing money, and buying high and then watching the price fall can play with emotions.As such, this stock still has lots of unhappy campers, who begin to see the company and its management as the symbol of their unhappiness and bitter feelings around their loss. This really shouldn’t need explaining but this stock was always going to get sold into for the first few announcements. As predictable as the tides.
But, as is so often the case with angry traders selling at lower prices than they should be, it provides an opportunity for other investors. Note the massive soaking at 25-27c.
3 times it’s bounced.
This accumulation will help create the shareholder base required to make longer term gains. Additionally, those buying now aren’t buying momentum, they are buying value and as such will naturally have a longer time-frame and more willingness to hold rather than trade out into any spike.
So my view is you don’t worry about those claiming that the current share price and selling into good news is due to the company being over valued and lacking fundamentals etc. They will still be claiming this long after the stock has bottomed and begun a longer term run. Price always runs ahead of fundamentals etc. Instead just look at key accumulation levels and understand that sooner or later the angry traders who bought early on (many of whom are long gone ) will run out of stock and will be a distant memory.
This is a 12-24 month play. Don’t stress about short term spikes and troughs. They happen in every multi bagger.
KTG Price at posting:
27.5¢ Sentiment: Buy Disclosure: Held
(20min delay)