Why Didata tanked

MONEYWEB, Byron Kennedy, 07 June 2002

Dimension Data has slumped to its lowest level in at least five years. Here’s why.

IT networking and services company, Dimension Data, slumped to its lowest level in at least five years when it touched 719c in intra-day trade on the JSE this morning. BoE’s Arthur Buchner tells Tradingweb that a combination of factors contributed to Didata’s latest bout of weakness including renewed negative sentiment towards IT stocks following a profits warning from US-listed computer chip maker Intel.

Overnight in the US the technology laden Nasdaq fell 2.5%. Now market speculators are guessing that another American IT bellwether – Cisco Systems – could follow Intel’s lead. The thinking here is that Cisco might as well take the pain while its peers are also bleeding. Historically the share prices of Cisco and Didata have a close correlation and is another reason that Buchner suggests is weighing heavy on Didata at present.

Another factor, says Buchner, is that Didata has breeched key technical support levels in that it has broken below a previous low and this usually leads to shares overshooting on the down side. With Didata last trading at 719c, off 8.9% on the session so far, Buchner rates the share as “a steal.”

In a recent Tradingweb article Gregor Krall, a technical analyst at NIB Securities, correctly called further Didata weakness and said a sharp correction below 500c “is not out of the question.”

Since the beginning of this year Didata stock has almost halved from 1420c while it has fallen 82% over the past twelve months.

Posted in Market commentary

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