Big U.S. investors joined the selling frenzy February 19, forcing CCA directors into crisis talks. CCA shares, which had doubled in the past 12 months to a high of $13.75, have plunged to around $8.50.
"Americans have been bailing out more than anybody," said Greg Matthews, Mercantile Mutual's director of Australian equities. "There's lesser confidence in it as a growth stock."
Analysts quoted in the Australian Financial Review say CCA may have "become a victim of its own arrogance". The company, which in October was trading at an extraordinary 64 times earnings, began to lose market support in November when it rejected a critical report by First Pacific Stockbrokers.
Days later CCA triggered the stock slide when it admitted it would have a flat trading year, instead of the double-digit growth expected. Local analysts, almost without exception, further downgraded their forecasts for 1997 and 1998 earnings, and institutions have been selling ever since.
Seeking to restore CCA's credibility, Norb Cole, the company's managing director, said he wanted the market to have a "true expectation" of CCA. "We want to create an environment that says that when [CCA] creates an expectation, it delivers on that expectation," he said. "For me the straight line is that CCA is a growth company; that the fundamental of our business is that it is, and continues to be, a growth company."
Copyright February 1997, Crain Communications Inc.