BROKEN ALLIANCE

AAC

AAC came out this morning short and it was sold by a whopper 11%. Its earnings were short (0.96 vs 1.42) and its guidance significantly lowered compared with previous guidance. The stock is trade at about 30X of its 04 earnings estimate, in anticipating of a very meaningful upward guidance. Now the guidance is no longer there! The question is how could the management be so much off base? My problem is what should I do with the position? Based on its 2005 guidance, the company probably worth about 32 (vs. 30 currently), and based its 06 guidance it probably worth 40. Should I hold the position for the couple of bucks recovery or should I eat the loss move on? Would I buy this stock today based on this release and guidance? Probably not. Therefore, I probably should eat the loss and move on.