Why Did My Stock Just Die?

Hope for financial stability in Europe drove U.S. markets higher again. Although your stock took a nosedive, don't panic. First, let's see whether it had good reason to fall. Sometimes, panic-fueled drops can make excellent buying opportunities. Here's the latest crop of cratered stocks that could provide a possibility for profit:

Stock

CAPS Rating (out of 5)

Friday's Change

Acme Packet (Nasdaq: APKT  ) *** (20.4%)
Calix (Nasdaq: CALX  ) ** (18.8%)
USEC (NYSE: USU  ) **** (9.7%)

With the Dow Jones Industrial Average (NYSE: ^DJI) soaring 267 points on Friday, or 2.3%, stocks that went down are pretty big deals.

Bad connection
I don't know what the market was so surprised about when Acme Packet reported third-quarter earnings last week, considering it warned at the beginning of the month that it would be missing estimates. It said AT&T (NYSE: T  ) was the cause of the miss, delaying an order that Acme says will come through this quarter. While that sounds like a timing issue, analysts were expecting Acme to put up strong numbers for the quarter by itself -- but now it looks like things will otherwise be flat. Seems the shorts knew what they were talking about.

Another AT&T customer, Powerwave, also cratered last week when it said revenues were going to be less than half what Wall Street was anticipating.

There was a lot being made over delayed capex spending by AT&T and Verizon (NYSE: VZ  ) early on, with the latter scaling back its FiOS rollout only to those areas where it had already made a commitment. But Ma Bell's own earnings actually showed higher capex spending than anticipated. While Acme was confident of its positioning still, it may mean one of its rivals is stealing share from its largest customer.

With 89% of the 574 CAPS members rating Acme to outperform the market, it's clear they still expect it to get its due. You can tell us on the Acme Packet CAPS page or in the comments section below if you agree, and then see whether AT&T follows through by adding it to the Fool's portfolio tracker.

Broadband's narrow chance
Broadband equipment provider Calix also got walloped as the reality of its revised guidance last month came to pass when it reported third-quarter earnings. But this doesn't appear to be a temporary issue, even if it's something of a timing one.

Back in May I noted that Calix had a short and risky window of opportunity based on President Obama's stimulus-spending program. Some $7.2 billion was appropriated for broadband projects, and all funds needed to be spent by September 2013. Turns out the window is slamming shut a lot faster than expected. Those stimulus funds have been a long time in flowing through, and it may take even longer as the Rural Utilities Service extended the deadline to 2015 for companies to submit their paperwork to get grants.

Even when companies have been approved for grants, some are rejecting them, sometimes because they're too restrictive, others because it was for projects out of its specialty. Windstream (Nasdaq: WIN  ) , for example, acquired Norlight, which had proposed a stimulus-based wireless project in Illinois. But Windstream chose not to pursue it after the purchase because it prefers wired projects. The delays and extensions show the awards Calix was counting on to move it forward may be a long time in coming -- if ever -- because there's a move afoot in Congress to return all unspent stimulus funds.

With its own acquisition of Occam Networks, though, CAPS member dcrednek thinks Calix's management can put together a stronger company.

CALX is simply worth more than $12 in a private M&A deal right now. Yes, telecom equipment companies have taken a beating. Yes, CALX is deeply cash flow negative at this time ([because of] the acquisition of Occam). Let's see what CEO Carl Russo can do to accelerate the merger of the two companies and generate some positive cash flow.

Add Calix to your watchlist, and let us know in the comments section below whether you think it will be able to get a strong signal for growth.

Not guaranteed
It's not the loan guarantee USEC was hoping for, but the Energy Department has agreed to some R&D funding for a uranium enrichment demonstration project. The loan guarantee is still pending, but DOE will provide USEC with up to $300 million for test manufacturing and operating production-design machines to see if they would actually operate at the scale necessary for full commercialization. Management says it "preserves a path" to salvage the American Centrifuge project, but it looks more like the trail has grown cold and it will be a long wandering in the wilderness.

The stock likely plummeted because it wasn't the loan-guarantee approval the market had been anticipating when it marched the stock higher earlier in the week.

Add USEC to the Fool's free portfolio tracker to keep abreast of developments and see if it will ever find its way through DOE's labyrinth, and see what others are saying on the USEC CAPS page.

Fool contributor Rich Duprey holds no position in any company mentioned. Check out his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of AT&T and Acme Packet. 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. The Motley Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 25, 2011, at 12:28 PM, berrygeorge wrote:

    USEC stock DID NOT plummit since news came out about the 300 million DOE addition to the process.

    Also , the name of the article is "WHY did my stock just die" ?

    Are you brain dead ? USU is "up" since the news and has been projected to go to 3.75.

    Please be sure you have the right ticker symbol when you report on these thing.

  • Report this Comment On October 27, 2011, at 12:06 AM, cstarkey5 wrote:

    I just want to take a second to reiterate what berrygeorge wrote above. I think that if we are going to report on the news of a company that we should make sure our facts are straight. The fact of the matter is that the author of this article didnt have the incorrect ticker number, he just failed to do his research before writing an article looking for hits. Its too bad for a company that is trying to succeed that this kind of non-factual information is posted as fact for real investors to read.

    The fact about usec on this particular day is the stock was down due to another article that suggested if there was no news soon, expect it to tank again. I am sure that there was also a few profit takers out there getting a little of thier losses back.

    The news that the author reflects on was very welcome news, and actually shows an interest and desire for the technology by the federal government. But all of this news was RELEASED AFTER THE BELL! a little fact that was left out. And the stock was up 9% in post market trading. Since then the stock is up over 10%

    my disclaimer: I DO own shares of usec, and therefore follow it close enough to know when certain news hits. I have been along for this very long, very nasty ride, and plan to be around for the trip back up too!

  • Report this Comment On October 27, 2011, at 1:39 PM, tomandjaneweyand wrote:

    I second the comments made by berrygeorge on 10-25-2011@12:28 p.m. and subsequent comment by cstarkey5 9n 10-27-2011 @ 12:06 p.m. I will be not renewing my Premium Service considering the misinformation and the sharing/selling of my name to others. I am very disappointed with "The Motley Fool " and their business practices. I would appreciate a response.

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