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 180,000-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 trading days:
|
Stock
|
CAPS Rating (out of 5)
|
Change Past Week
|
| Perfect World (Nasdaq: PWRD ) |
*** |
(24.4%) |
| Durect (Nasdaq: DRRX ) |
*** |
30.8% |
| Global Industries (Nasdaq: GLBL ) |
***** |
52.4% |
Source: Motley Fool CAPS, % change from Sept. 9 to Sept. 16.
Pay to play
The free-to-play/pay-to-play-more online gaming business model is not a tried-and-true winner, though gamers from Perfect World to Electronic Arts have broadly adopted the method of having a recurring revenue stream. Even mobile-gaming specialist Glu Mobile (Nasdaq: GLUU ) switched over to the in-game promotion model.
It might be popular with companies, but players are at not completely sold on being nickeled-and-dimed for the game experience. Perfect World issued what to me seems like a warning to other gaming outfits. It reduced its revenue guidance for the coming quarter from a range of RMB756 million and RMB803 million to RMB702 million and RMB741 million. Mind you, the original guidance was given less than a month ago.
The reason it's cutting back projections, though, is because it's easing the in-game promotional activities to "length the life cycle" of its existing portfolio of games. What it seems to be admitting is that constantly dunning players for potions and ammo wears down their willingness to stick around. While Perfect World contends that it will just be for a single quarter, it hardly seems likely that players will suddenly approve the buy-to-play model jumpstarting again.
The sharp pullback in P-World's stock is a possible buying opportunity for some, but I'm not convinced this isn't a symptom of a much broader issue that will plague other gaming shops, too. I've rated it to underperform the market on CAPS, but I'm in the minority there, where 94% of the members weighing in think it will be able to beat the broad indexes.
Head over to the Perfect World CAPS page and let us know whether you think this online gaming specialist still got game.
No pain, no gain
There was no company-specific news to account for Durect's jump in value last week, other than that it made a presentation at an investor conference, so maybe that offered some hope for Pain Therapeutic's (Nasdaq: PTIE ) Remoxy, the abuse-resistant formulation of oxycodone the FDA rejected over concerns about its chemistry, manufacturing, and controls.
Durect helped Pain Therapeutics develop Remoxy, which is a taffy-like capsule that prevents the oxycodone from being crushed, snorted, or injected. PT, its marketing partner Pfizer, and other drug developers are charged with coming up with ways to limit the abuse of their drugs by foiling an addict's ability to extract the active ingredients from them.
When the FDA sent Pain Therapeutics the complete response letter, Durect also suffered an agonizing drop, losing nearly a third of its value in one day. It's since been limping along until last week's price action.
Without something more concrete to account for the move, investors should expect that the gains won't hold, but 91% of CAPS members rating Durect still believe it will beat the Street. Add the drug developer to the Fool's free portfolio tracker and see whether it can still get sky high.
A weak foundation
Although ExxonMobil (NYSE: XOM ) or BP might be stocks that first cross an investor's mind when thinking about investing in the oil industry, they might instead want to consider the support group of these titans -- the oil services industry, where valuations are still relatively inexpensive.
Europe's second largest oil services firm, Technip, is looking around its own industry for value plays, and it found one in Global Industries, a specialist in subsea services. It announced its intention to buy Global for $937 million, or $8 a share, a 55% premium to where it had been trading.
Although Bloomberg data suggests that Technip was willing to pay up for Global -- the deal is valued at 1.4 times enterprise value compared with the average of 1.0 in the energy-services industry -- but it will be immediately accretive to earnings and expands its deep-to-shore subsea infrastructure offerings by 30%, making Technip a more attractive alternative for customers Exxon, Royal Dutch Shell (NYSE: RDS-A ) , and Total.
The special nature of Global's support services no doubt explains why 98% of CAPS All-Stars rating it thought it would outperform the broad market averages. Add Global to your watchlist to see whether the deal goes through as intended.
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