Whoa! What Just Happened to My Stock?
Yet another day of better than 100-point gains has erased last week like a bad memory. But resist the urge to high-five everyone in the cubicles next to you. Your stock may have just strapped on a rocket pack and taken off for the moon, but smart investors won't celebrate until they know that upward leap was justified. Without a fundamental basis for the bounce, these stocks can quickly make the return trip down.
Is now the time to lock in profits, or is this just the first step toward even higher valuations down the road? Let's examine several stocks that just hit the afterburners, and see whether they're truly headed into orbit.
CAPS Rating(out of 5)
|Motricity (NAS: MOTR)|
|Cytori Therapeutics (NAS: CYTX)|
|Dendreon (NAS: DNDN)|
The market jumped 213 points yesterday, or almost 2%. Not a bad recovery, seeing how bleak things looked a week ago, so stocks that went higher are still pretty big deals.
Higher and higher
Maybe Google's (NAS: GOOG) decision to go all-in on its Android platform yesterday to take on the likes of Apple and Microsoft in wireless telecom gave Motricity investors hope that it might look their way, too. They can keep on hoping.
Through its mCore platform, Motricity helps carriers like Verizon and AT&T (NYS: T) provide entry-level feature phones with various levels of third-party content and applications. While it does offer smartphone technology, too, the carriers have their own platforms and don't need Motricity to allow their subscribers to access the mobile Internet. In this regard it's more like troubled Chinese app-market provider Sky-mobi -- which also targets the "dumb phone" market -- than like InterDigital with its vast, lucrative portfolio of wireless patents.
I think they are suffering from a management team that is not accustomed to meeting shareholder expectations. Communication and guidance has been awful. The conference call sounded like they have no idea where a new revenue stream will come from. International? Smartphones?
Let us know on the Motricity CAPS page whether you think it can still connect to growth.
Calling all bulls
There was no real news driving Cytori Therapeutics shares higher yesterday, but a string of small events seemed to build confidence that all is not lost for the stem-cell researcher.
On Friday, several executives and directors bought some shares of the biotech on the open market. They weren't humdinger purchases, but rather just tranches worth a few thousand dollars each. However, the CFO did by $20,000 worth of company stock, and coupled with the announcement yesterday that Cytori's CEO would be making a corporate presentation at the annual shareholder meeting today, that seemed to be enough to cause investors to expect positive news.
I like it when a CFO buys company stock. He has his fingers on the pulse of the company's finances and ought to be in a better position than even the big-picture CEO to know whether the company will be making money.
While most stem-cell companies jumped yesterday, including Geron (NAS: GERN) and Pleuristem Therapeutics, no one gained as much as Cytori.
Highly rated CAPS All-Star and biotech guru zzlangerhans says Cytori is something of a polarizing company, in that analysts either love it or hate it. Our CAPS member sees potential for it but finds it a very risky stock.
I've scored on Cytori in both directions, although I still find them too volatile and unpredictable to risk real money on. Today I saw the share price close to a one year low and I believe there's a substantial probability the stock will recover as ADVANCE gathers steam. Ultimately I'm on the negative side but I see more cycles of expansion and contraction in the future.
Add Cytori to your watchlist, and then head over to the Cytori Therapeutics CAPS page and let us know whether you think it can regenerate its stock's value.
Waiting to exhale
Dendreon investors must be getting tired of these roller-coaster rides, but I'm sure they prefer up days like yesterday than the sickening plunges similar to the one it took the other day.
The fall was the result of uncertainty surrounding reimbursement for Dendreon's Provenge. With treatments costing $93,000 and doctors having to front the money with no certainty on getting repaid, sales of the prostate cancer therapy were weak to say the least, and Dendreon pulled its sales guidance for the year. Contrasts were made with Bristol-Myers Squibb's (NYS: BMY) Yervoy, a treatment that costs $120,000 but is eligible for prior approval from insurers, so doctors know ahead of time whether they'll be reimbursed.
Yesterday, though, a blog post by Andrew Tobias suggested that Medicare had issued Provenge a "permanent J code," meaning doctors would have the same level of reimbursement certainty as they do with Yervoy. Investors took it to heart that the ambiguity the market hates has been removed, and the stock once again looks like a buy.
Risk still abounds with Dendreon, hence its low, two-star rating on CAPS. But with 83% of the 1,643 CAPS members who rate the biotech believing it will ultimately beat Wall Street's expectations. Add the stock to the Fool's free portfolio tracker as it continues its wild ride.
Going into orbit
That's why it pays to start your own research on these stocks on Motley Fool CAPS, where you can read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from the stock's CAPS page. Then you can decide for yourself whether your stock's headed for re-entry or off to infinity and beyond.
At the time this article was published The Motley Fool owns shares of Google and Dendreon. Motley Fool newsletter services have recommended buying shares of InterDigital, AT&T, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributor Rich Duprey has no financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.
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