The Market Just Crushed My Stock
|Westwood One (NAS: WWON)||*||(19.3%)|
|VASCO Data Security (NAS: VDSI)||*****||(13.9%)|
|Mecox Lane (NAS: MCOX)||*||(8.1%)|
With the Dow Jones Industrial Average (INDEX: ^DJI) soaring 275 points yesterday, or 2.5%, stocks that went down harder are pretty big deals.
When not even a merger announcement can revive your stock, you know you're in trouble. Network radio programmer Westwood One announced at the end of July that it would be merging with privately held Triton Media Group in a stock for stock deal though no financial details were revealed.
Westwood has been shedding assets to improve its balance sheet and fend off the encroachment of rivals like Sirius XM Radio (NAS: SIRI) and other terrestrial-based programmers. It sold its traffic division to Clear Channel before the merger deal was announced. With a dearth of publicly traded rivals to choose from, Westwood will continue to trade on the markets, but under the ticker symbol DIAL, reflecting that it will be part of Triton's Dial Global unit.
There was nothing to specifically account for Westwood's plunge yesterday other than the filing of the merger documents Tuesday. CAPS members have been sanguine about the programmer's prospects for dialing into growth anyway, with just 70% thinking it can beat the market averages while All-Stars weighing in were even more circumspect, with fewer than two-thirds thinking it could beat the Street.
Add Westwood One to the Fools' My Watchlist feature to keep track of whether the combined company will be able to successfully meet the challenge.
The devil's in the details
The fallout from the security breach at VASCO Data Security continues to mount. Last week one of its subsidiaries, DigiNotar, issued a digital certificate to an entity fraudulently claiming to be Google (NAS: GOOG) and, according to the Dutch government, approximately 300,000 Internet users in Iran had their online activities spied upon.
Worse for VASCO's reputation, the certificate had been issued as far back as June, meaning Iranians were exposed for an extended period of time. Certificates for the Dutch government, as well as security agencies here in the U.S. have been compromised as well. DigiNotar knew of the hack by mid-July and began revoking the certificates, but didn't go public with the breach until the end of August. On Wednesday, VASCO's Dutch rival KPN announced that it was winning "hundreds" of new certificate orders in the wake of the hacking attack.
No doubt this is a body blow to VASCO, and the loss of customers is bound to only get worse. Analysts at Wunderlich Securities see the DigiNotar business turning into a "total loss." While it paid $12.9 million for the company just this past January, it was expected DigiNotar would drive an additional $6 million in sales annually for VASCO.
An investigation of the attack also reveals what was apparently some shoddy due diligence on VASCO's part. Apparently DigiNotar ran out-of-date software, used easily guessed passwords, had no firewalls to contain a problem, lacked secure logging, and had no antivirus software at work. For this, VASCO paid $13 million?
The problem is that VDSI has no real moat to speak of. In their industry, I view them as competent but not formidable. The PEG ratio at 2.5 is higher than I like, but tolerable. The P/E is now more reasonable at about 19. All in all, I'm thinking the stock has a reasonable shot at a 50% gain in the next year or two
Let us know on the VASCO Data Security CAPS page if you think it can recover from this reputation-rending incident.
It's nearly a year since its IPO, and Chinese online clothing retailer Mecox Lane looks no closer to becoming an Amazon.comof the Orient, let alone remaining profitable. Second-quarter results were released revealing its threadbare performance: falling margins, sales dipping ever so slightly, and an apparent sudden surge in competition. Management said venture capitalists financing rivals made for a fierce competitive environment.
Legit IPO, investment by SINA and Dongxiang (Kappa) at much higher prices, cooperation with SINA's weibo (Chinese twitter), trading at cash per share. If they turn a profit this thing could double or better. If not, can't get much cheaper than this.
With just 67% of those rating the retailer thinking it can outperform the broad market averages, you can let us know in the comments section below or on the Mecox Lane CAPS page whether you think this online retailer can put some starch in its stock.
Ready for a resurrection
Just because your stock has taken a beating doesn't mean it's going to roll over and die. Markets are known for overreacting. A closer look on Motley Fool CAPS at what's happened to your stock can give you an edge over other investors who just react to the market's lead. You can decide for yourself whether it's ready to come back from the dead.
At the time this article was published Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Google. Motley Fool newsletter services have recommended buying shares of VASCO Data Security, Google, and Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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