You saw the headlines. You know your stock price made a big move. But what does that portend for your investment's future?
By pairing the latest news with the collective wisdom of our 170,000-strong Motley Fool CAPS investing community, we might be able to discover whether your stock's latest exploits are a short-term hiccup -- or the start of a much bigger trend.
The following stocks have all made big moves over the past five days:
CAPS Rating (out of 5)
Change Past Week
|Qihoo 360 Technology (NYSE: QIHU )||
|Zalicus (Nasdaq: ZLCS )||
|Allied Irish Banks (NYSE: AIB )||
Source: finviz.com, Motley Fool CAPS. Change from April 13 to April 20.
Browsing for a better deal
How do you monetize something free? China's newly public Qihoo 360 Technology gives away its Internet browser, but apparently makes quite a bit of cash from advertising, as well as adjunct offerings such as antivirus software, online games, and other Web-related services. Revenue soared 79% last year, no doubt resulting from Qihoo's better-than-85% Chinese user penetration rate. It's the second most popular browser behind Internet Explorer.
We can probably expect Microsoft's lead to evaporate soon enough. Just as Baidu (Nasdaq: BIDU ) has gargantuan share over Google (Nasdaq: GOOG ) in Chinese search, it's likely that local users will assert a parochial preference for a Chinese browser company. The situations aren't completely analogous, since browsers themselves don't have to address the censorship issues that plagued Google in China, but the home-field advantage likely means something.
Qihoo's IPO last week was priced at $14 a share, but the stock opened at $27 and closed the day at $34. It sure seems like the company's underwriters left a lot of money on the table for Qihoo.
Though Qihoo just went public, it has already attracted picks from more than 50 CAPS members, underscoring how popular Chinese investments remain, despite numerous accounts of deceptive stocks in other segments of the country's market. With 18% of CAPS members who've rated the browser company expecting it to underperform the market, our community's at least showing some degree of caution, though its hesitation is probably related to valuation at the moment.
Browse the Qihoo 360 Technology CAPS page and let us know whether you think if, at a market cap of $3.8 billion, it's really worth the price.
A short course in poor PR
Analysts at Wedbush recently initiated coverage of biotech Zalicus, noting that royalties from its pain medication Exalgo, which it markets with Covidien, could hit $36 million by 2013. Better yet, a lot of other opportunities await in its pipeline. Surely, the price target of $5 a share the analyst pegged on Zalicus has nothing to do with the equity distribution agreement Zalicus made with Wedbush back in February!
Of course, Wedbush could have stepped in precisely because it did think the current valuation was low based on the company's potential. After all, JMP Securities also gave Zalicus a price target of $5 a stub late last month. The biotech does have some strong opportunities before it, though the federal government's new initiative to clamp down on prescription drug abuse may make it more of a challenge.
Zalicus, Covidien, and Johnson & Johnson (NYSE: JNJ ) are among a list of 16 companies that will need to confront enhanced regulations designed to combat abuse of opioid medications.
Highly rated CAPS All-Star zzlangerhans thinks even without the new regulations, everyone's feeling a little too good about Zalicus's prospects. Its pipeline candidate Synavive has a spotty history, and even Exalgo sales are built on little more than hope:
In 2009 the company mortgaged their future by diluting massively to buy Neuromed, the private developer of an extended-release opiate called Exalgo. Since that time the share price has ballooned from 30M to 90M. Exalgo was approved by the FDA a year ago but like most other analgesics approved in recent years has failed to make any significant commercial impact.
In true pumper style, every drug and technology platform Zalicus has ever floated is then paraded out as the next great medical breakthrough. But in five years Zalicus has never completed development of any drug or even initiated a phase III trial.
Add Zalicus to the Fool's free portfolio tracker to see whether it can alleviate the pain of a low valuation, or whether everyone's just getting a contact high from analyst enthusiasm.
No assurance on veracity
The euphoria over Ireland's decision to nationalize much of its banking system proved about as satisfying and long-lasting as cotton candy. Thus, Allied Irish Banks' dalliance with a rising stock price was bound to come to a screeching halt. Both it and Bank of Ireland (NYSE: IRE ) will survive, absorbing all the other financial institutions in the country in the process, but not everyone is going quietly. Allied's bondholders naturally object to the government devaluing their bonds by 80%; they plan to challenge the move in court. Ireland's plan also required the bank to take a massive $12.3 billion charge, which upset investors.
CAPS member Briancasey88 admits the risk inherent in an investment here, but thinks AIB can crawl forward to recover:
Being effectively nationalized is not fully. it is a risky stock, but i believe that it has the promise of a resurgence though the time frame is longer than previously thought. if AIB can stay afloat it will rally it's self to the levels of fall 09.
You can see if investors can bank on an Allied recovery by adding it to your watchlist.