Technology stocks are some of the most fascinating and lucrative investments that an individual can make. Yet they can also be extremely volatile, taking investors on a roller-coaster ride that they may have never anticipated.
Fortunately, here at The Motley Fool CAPS we have a way of trying to anticipate which companies are doomed to defeat or poised to pop. Our investing community of 165,000 people aggregates intelligence and ranks stocks according to their ability to outperform the market moving forward. A one-star stock is least likely to outperform, while five-star stocks are the true studs of the investing universe.
Today we'll look at a few tech stocks that have a four- or five-star ranking, yet have taken a real beating as of late. Hopefully, we can gain some clarity to see if they have any chance of maintaining their prestigious status:
| Company |
Price-to-Earnings Ratio
|
13-Week Price Change
|
CAPS Rating
|
|
DragonWave (Nasdaq: DRWI )
|
5.1
|
(0.3%)
|
*****
|
|
Neutral Tandem (Nasdaq: TNDM )
|
10.6
|
(8%)
|
*****
|
|
Suntech Power Holdings (NYSE: STP )
|
11.5
|
(9.2%)
|
****
|
Source: Motley Fool CAPS, Aug. 7.
Canadian backhaul wireless provider DragonWave has had a mixed year in 2010. Despite reporting great revenues and earnings, mostly because of its deal to build out Clearwire's (Nasdaq: CLWR ) network, the stock is down about 47% year to date. Most of the concern revolves around the fact that Clearwire is DragonWave's main customer and source of revenue, and that revenue stream will drastically slow down (and according to management, much sooner than anticipated). There have also been rumors that Clearwire will look to diversify its suppliers, possibly shifting business away to main competitor Ceragon Networks (Nasdaq: CRNT ) . However, CAPS members are very optimistic that this small-time player can outperform the market, so next quarter's earnings should provide some much-needed clarity.
Neutral Tandem has seen its shares drop by more than 40% as well this year, and second-quarter results certainly didn't help. It reported a 9% increase in revenue, but lower-than-expected earnings that were hurt by increased expenses. The company also stated that they expect full-year net income to come in at the lower end of its spectrum. Just to add insult to injury, Tandem was downgraded by Baird & Co., as the analyst noted the probable continuation of increased competition.
The year hasn't necessarily been a great one for solar players, especially companies such as Suntech that make crystalline silicon solar panels. Suntech recently told analysts that it was expecting a net loss in the second quarter and that revenues were increasing, there would be a slight drop in gross margin. Both Suntech and another Chinese player, Yingli Green Energy (NYSE: YGE ) , have gotten crushed year to date, so it should be interesting to see how they fare when they report earnings later in August. On a positive note, one distinguished standout has been Solarfun Power (Nasdaq: SOLF ) -- shares are up 40% so far this year. Not only did Solarfun announce double last year's revenues, but it also doubled analyst earnings expectations, reporting a second-quarter adjusted EPS of $0.59.
Foolish bottom line
Sitting at the coveted four- or five-star ranking, these companies have already won over the CAPS investing community. However, at the rate they're going, they're bound to be a one-star dud in no time. Think any of the three companies above have what it takes to maintain their status and turn things around in the latter part of the year?
Let us know in the comment section below, or head over to CAPS and rank them yourself!
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