Virgin Blue Share Price below issue and still falling

[Beer Can Dreaming]

Was just alerted to the fact that VB's share price has plumetted below its initial issue price of AUD$2.25 a share and is still falling.

At last call it was $2.18 and talking to brokers could still fall further in the short to medium term.

Increasing pressure from JetStar combined with rising operational costs of VB has put apparent increased pressure on this company.

Apparently Brett Godfrey has stated that they will slash operating costs across the board by 10% to increase profit and reduce spiralling costs, but I am interesting to see where these cost-cutting measures will come from.

Now lets see how Brett Godfrey performs with this seemingly basic problem that has befallen every other operator around the world.

[1013]

At a time when the Australian Stock Market is up near record highs and Virgin Blue has claimed it is on track to make yet another record profit,this is very worrying.

Either the share holders have lost faith in the prevailing management or stock market analysts have major concerns about the company's and managements ability to perform.

Agreed,the advent of Jet* will continue to put increasing pressure on Virgin Oz and if the market doesnt grow largely as pointed out on a previous posting then someone will lose market share and start to go backwards.

Other companies have hits and knocks (ie: CX/QF/SQ/Dragonair et al' after 9-11 and SARS) but never did they decrease below their initial share price issue.

To do so causes severe alarm bells to ring and if institiutional investors dump VB stock in favour of other more aspiring investments,then they can expect their market capitalisation to drop severly.

If that were to happen then the game will really be afoot.
It would then be up to the incumbent management at Virgin Blue to prove themselves in an adverse trading scenario which might not be so easy seeing the narrow margins in which they operate.

[Desert Dingo]

While you are at it, why not knock Qantas as well? Their share price has also "plummeted" 40 cents over the last two months.
(Any time I see "plummet" connected with an aviation story it triggers a b/s alert for me.)
:p

[Sonny Hammond]

At the time VB was floated, a lot of boffins reported that they felt at $2.25 VB was over priced. Once listed you had too pay $2.44 for VB, so trading below $2.25 is well under its list price.

At $2.25 VB traded at a higher PE ratio than QF. This means that per share VB would earn more for the shareholder than QF.

Now, while VB has done well, this assuption was a bit of a stretch.

Maybe now we are seeing the correction that will show what VB is really worth.

I guess at the end of the day it really shows just how shrewd Branson, Corrigan and Godfrey really were to float when they did and to get the price they did.

The Market seems to be pricing in tougher times for VB!

BTW QF debuted at $1.75 from memory and has been up to nearly 5 dollars.

So at $3.35 I don't think too many investors are panicking unless they paid the big bucks......:ugh:

[Johhny Utah]

Dingo, I think the following figures will address your 'concerns' regarding the relative performance of QAN & VBA shares.:rolleyes:

The following figures were quoted in the bloomberg article Virgin Blue Chief Executive Godfrey Eyes Asia's `Pots of Gold' (http://www.pprune.org/forums/showthread.php?s=&threadid=128117)
Virgin Blue shares rose 1 cent to A$2.27 yesterday. The stock, which was sold in a December initial public offer at A$2.25 apiece, has fallen 13 percent from a February high of A$2.61. Qantas shares fell 5 cents to A$3.47. They have risen 1 percent since Virgin Blue shares started trading Dec. 8.

That was from last week. If we look at the figures today, we see:
VBA opening at A$2.21 - down 15% from the post float high of A$2.61.
QAN opening at A$3.36 - down 11% from their high of $3.80 in the same time frame.

As such, the QAN shares have actually 'outperformed' VBA during the given time frame.

However, as others have pointed out, of more concern is the fact that VBA shares have now fallen BELOW their ISSUE price. The high price paid by many during the Virgin IPO meant that VBA shares were trading at a much higher P/E ratio than QAN - thereby implying that the market expected greater rates of growth from the company than QAN.

Perhaps the decreasing share price & subsequent P/E drop is an indication that the market thinks that DJ is running out of steam? After all, whilst it would be nice to keep on expanding forever on the back of a low cost base, it unfortunately just isn't possible.

The introduction of JetSt*r, coupled with DJ's rising costs & movement away from the 'low cost model' seem to be the greatest factors in the declining share price.

I can only feel for those Mums & Dads, not to mention DJ staff, who were caught up in the 'excitement' of the DJ float, and who might now find that, investment wise, they would have been better off putting their money under the mattress....:uhoh:

[RaTa]

Johhny Utah

I would think the view that Virgin is running out steam is a little miss placed. I gather they have not been doing too much extra lately due to lack of new airframes after CASA put the brakes on new deliveries. (another story). I think once the brakes are released you will see more "trumpet blowing" and expansion from Virgin.
With regards share price I would only start to worry when the price gets below $1.80, but there again I still have my original AMP shares!!!! :{

[Johhny Utah]

Where's all the expnsion going to be RaTa? Virgin has been able to expand rapidly whilst it has been the only 'low cost' airline in Australia, but that is all about to come to an end. I think that DJ's expansion will slow down greatly once Jetst*r starts flying.
From then on in, I think they might find it a bit of a hard slog - being squeezed by Mainline from above, and being undercut by Jetst*r from below.
Many of the share market analyst have been predicting such an outcome - more than likely contributing to the decline in the VBA share price.:ugh:

It will be interesting to see what sort of numbers DJ produce when they publish their first Annual Report at the end of the FY - and especially how these numbers will compare with not only what Godfrey et al have publicly stated, but more importantly, how they were derived.:rolleyes:

Intresting times ahead indeed for VBA share holders...:confused:

[The_Cutest_of_Borg]

These things are cyclical and the VB share price is just as likely to turn around next week.

I have nothing against VB. However on the day VB floated we had the spectacle of Richard Branson, saying that he would be enjoy watching the QF share price fall as the VB price was going up to finally overtake and surpass it.

In effect he was saying he would enjoy watching Qantas shrink and shed Aussie jobs, to enrich a Pommy blow-in such as himself. It stuck in my craw then and it does now.

There is room for both these companies and long may they both prosper.... but I must admit to a touch of schadenfreude when I see the market treating VB as just another company that needs to perform like all the rest of them, and not some enchanted cash cow led by a untouchable wunderkind.

rant over.

[Thumbs up]

RA TA ,If you are still holding on to your original AMP shares then you probably got them for nothing,so even if they go out the back door you still havn't lost.

Dead right,Sonny.The timming of the float was probably one of the smartest decisions VB made, for Branson, Godfrey, ect.
Now for the first time since the Ansett demise they are going to have fight for their supper,but that was always going to be the case,it was just a matter of when.

I lost a faith in Aussie share market institutions after 120+ of them piled on to the VB float.
If things really go pear shaped for VB don't expect Branson to cough up any of the large fortune he's already clevely extracted.
It will be Corrigan that'll be left to fill the blanks.

Lets see what happens now.!

[Desert Dingo]

Today Virgin shares closed at $2.23, up 2 cents on the opening price. Bit hard to call it "plummeting" now.
(However they did trade as low as 2.15 at one stage. Do airline shares have a GPWS "pull up - pull up" to stop them hitting the deck? :ok:

[cunninglinguist]

So how will this effect the performance of the pilots ? " because they own the airline they put in that bit extra effort "
With the share price falling will we now see 1s and 2s in the sim instead of 3s and 4s ? Maybe they will do the take off but not the landing ? ;)

Am I the only one, or do those VB ads make you wanna be sick ?
( having a dig at Vb advertising not Vb crew ! )
Maybe QF should put out an ad " Our staff own the airline also, and their shares have nearly doubled in value, so they will work twice as hard for you "

or maybe:

" alot of our pax own a part of the airline, so naturally, we expect they will act like human beings on our flights "

....................yeh, right.

[lame]

Like they say, owning an Airline (ANY Airline), is the best way to turn a large fortune in to a small fortune. ;)

[oldhasbeen]

.....didn't even know there were 3's and 4's on the sim report form, l....ia licker,I thought 1's and 2's were were the high scores.............DOH!!!:sad:

[Sheep Guts]

Being a QANTAS Share holder and an Aspiring Virgin Pilot. When my QANTAS shares which I bought for $1.91 in th nineties, were at $5.00 high 3 years ago, then plummeted to a measely 3 bucks after Branson made his announcement in Brisbane, of his intenetions with a Low Cost start up. I cried !!!!!!!!!!QANTAS share have rebounded a litlle, but not enough to convince me Id better NOT sell them to contribute to my NG Rating :):E


Sheep

[TIMMEEEE]

Sheep Guts.

I subscribe to the Waren Buffet school of investing.
Any profit is far better than any loss.

Also when others were investing like twits in every tech stock under the sun I heeded the advice of Mr Buffet and stayed away from these 'worthless entities' as he called them and invested in good ol' Sydney real estate.
History has proved Mr Buffet a very shrewd operator.

So Sheep (or is that Mr Guts?) on todays share price you've made an 85% profit in 3 years.
Not too bloody shabby and nothing to be sneezed at in any mans language.

Now my next question - did you or are you going to buy Virgin Blue shares?????????

[Dambuster]

But then again pilots,doctors and lawyers have typically been useless with money.
You would think this guy would sell his Qantas stock (reackon he would have got a few decent dividends) and reinvest in another growth stock in a more stable market.
Agree with the mantra about a gain being better than a loss.

The 'share gurus' slagged off Mr Buffet and his company Berkshire Hathway because he didnt follow their path to damnation and refused to follow their rules.
Buffet termed dot.coms "trendy" stocks and accurately predicted their demise,but very shrewdly bought up big on other undervalued bluechip "non trendy" stocks which have skyrocketed since the dot.com crash.

A fool and his money is soon parted.

[Sheep Guts]

Well Timmee,
I wouldnt say noi if I got stock options on employment with VB I dont know if thats available to new hires.

I am lucky Ive saved my pennies Timme and prolly wont sell my QANTAS stock or CBA for that matter. Im,going to look at mining maybe and overseas stock portfolios. Allthough the prices of have meteals have soared this year due to super growth and contruction in China. Saw a doco the other day on Hyundai heaveyindustries they complete a supertanker every 4 days. Not a bad production rate.

Sheep

[cunninglinguist]

hope their supertankers are built better than their cars ! for the sake of marine life everywhere ;)

[Soho_Sophie]

Speaking about supertankers - Trouble with most pilots who are waiting for their ship to come in - chances are, they'll be at the airport when it does:)

Sheep Guts - you are on the right track. "Investing in China today is like the English investing in America in the 1800s". It will soon be the largest economy in the world.

Dambuster - Read Robert Kiyosaki (author or Rich Dad/Poor Dad series). His book Guide to Investing - What the Rich Invest in That the Poor and Middle Class do Not.

Page 79 - when faced with the decision to join the airlines as a pilot or not??? "A job with the Airlines may not be that secure" Doh!

Page 99 - Choose a job as a pilot with the airlines or make my own path... luckily he didn't join the airline - now a millionaire on his way to being a billionaire:ok:

Don't forget guys, "bear markets are often the best times to become very, very rich.

And, take care because he predicts that "market crashes will come faster and more severely in the Information Age:oh:

[Dambuster]

Thanks alot Soho.

Unfortunately for VB the share price has just fallen below that psychological barrier of $2.00 and fallen to $1.99.
Thats over 16% below the initial issue price.
Expect further selling as institutional investors vote with their feet and their managed portfolios and take their money to a safer place or better investment that can at least pay a dividend.

I wonder who Brett Godfrey will blame for this one !!

[Rich-Fine-Green]

No comment from me...

I invested in the Compass IPO...

:} :p