Why Did My Stock Just Die?

Earnings season begins anew and doubts about the strength of the economy still filter through expectations. A combination of anemic results and weak guidance led the Dow to fall by 128 points yesterday, or 1%.

Yet some companies fell even further, dropping by double-digit percentages. While the rout could be warranted, sometimes it's just a lemming-like response to a temporary situation. So let's see whether they had good reason to tumble as panic-fueled declines can sometimes lead to excellent buying opportunities.

Company

% Change

OCZ Technology (Nasdaq: OCZ  )

(40.3%)

Threshold Pharmaceuticals (Nasdaq: THLD  )

(11.7%)

ParkerVision (Nasdaq: PRKR  )

(9.5%)

A solid mess
Maybe they just gave away the store. Going for market share against industry leaders Seagate Technology (Nasdaq: STX  ) and Western Digital (Nasdaq: WDC  ) , solid-state drive maker OCZ Technology was crushed by news it was delaying filing its financial reports because of problems surrounding its customer incentive programs that are leading to a "significant" loss quarterly loss. The CEO apparently boosted rebates and price discounts to such a degree that revenue was materially affected, and while he abruptly resigned last month for unspecified reasons, it's clear now he had lost control of the company he founded.

Now the drive maker is stuck with a credibility problem because last month it blamed the reduced revenue situation on a NAND memory shortage. Having gone all-in on the SSD market a year ago, it was under pressure to perform and prove the bet was smart. With SSDs the drive of the future, I had rated OCZ to beat the market on Motley Fool CAPS, the 180,000-member driven investor community. Bad call. The stock's dropped 70% since then, compared to a 15% gain in the S&P 500.

The big bet obviously created an environment that allowed the envelope to be pushed too far. The board of directors ultimately bears some responsibility for not reining in the CEO sooner, but it will have to pick up the pieces from this debacle.

In my mind, there's little hope OCZ will survive in its current state, so I'll be closing out my CAPScall on it. If rumors ultimately prove true that Seagate wants to buy it, the drive maker could get a bounce. I don't think that will happen any time soon, but tell me below in the comments box what you think will be the fate of OCZ Technology.

Lies, damned lies, and statistics
There was no specific-company news that sent shares of biotech Threshold Pharmaceuticals tumbling more than 11% yesterday, but it's been falling ever since reporting less-than-positive results for its experimental cancer therapy TH-302.

Two weeks ago, Threshold updated the results and reported patients treated with a larger dose of the drug survived 9.2 months while patients receiving a smaller dose lived for 8.7 months. That compared favorably to the 6.9-month survival rate for those only being treated with Eli Lilly's (NYSE: LLY  ) Gemzar. Sounds good, right? Except the trials weren't designed to say if this was statistically significant, and when "crossover" patients are removed -- that is, patients who began taking TH-302 after their tumors started growing again -- the results get distorted.

The stock, which had been trading just north of $9 a share, has lost more than 40% of its value. There's a $1.5 billion market staring Threshold Pharmaceuticals in the face for its pancreatic cancer drug, and that's just in the U.S. Considering the many risks biotechs face in navigating these trials, do you think the it will come out successful at the end? Let me know below.

Vision quest
Wireless chip maker ParkerVision also moved lower on no company-specific news, but there's a lot of moving parts here. In addition to being a heavily shorted stock (days to cover stands at more than 18 days, even though that's lower than where it was two months ago ), it recently closed a stock offering of 4.3 million shares at $2.30 each  , and it's locked in a patent infringement lawsuit with Qualcomm (Nasdaq: QCOM  ) .

Despite the challenges, some analysts are convinced it can still prosper even if it ultimately loses the lawsuit, though the optics are much better if it's successful. The market opportunity is around $10 billion, and with just a minuscule fraction of the total, ParkerVision could generate $120 million annually  . But its radio frequency chipset won't hit the market till next year, so the stock is sure to be volatile in the meantime. Keep an eye on this mobile chip maker by adding it to your Watchlist.

Ready for a resurrection
The mobile revolution is still in its infancy, but with so many different companies, it can be daunting to know how to profit in the space. Fortunately, The Motley Fool has just released a free report on mobile named "The Next Trillion-Dollar Revolution" that tells you how. Inside the report, we not only describe why this seismic shift will dwarf any other technology revolution seen before it, but we also name the company at the forefront of the trend. Hundreds of thousands have requested access to previous reports, and you can access this new report today by clicking here -- it's free.

Rich Duprey owns shares of Seagate Technology but has no positions in any of the other the stocks mentioned above. The Motley Fool owns shares of Qualcomm and Western Digital. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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 (5) | Recommend This Article (5)

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 11, 2012, at 10:11 PM, stockexpertpro wrote:

    Bankruptcy and Pink Sheets coming this is another DDMGQ Company is out of cash now accounting fraud game over for the bagholders there going to be wiped out there holding worthless paper and its going to zero

  • Report this Comment On October 12, 2012, at 8:51 AM, valueinvestor10 wrote:

    Actually, the rumor that Threshold had less than positive results was completely wrong. A case of many investors and a handful of so-called analysts and bloggers who do not understand medical trial results.

    The results have actually been excellent. IN fact, Threshold CEO Dr. Barry Sellick used the term "hit out of the ballpark" at a conference on Wednesday when walking the audience through slides of the results.

    The false scare was the discussion regarding an endpoint that was not a goal of the study and was tainted by cross-over patients who they felt would benefit from TH-302. Unfortunately for the share price, it dropped temporarily, but it appears that at least three of the major institutional investors and some insiders picked up cheap shares the past two weeks, as did I.

  • Report this Comment On October 12, 2012, at 8:55 AM, valueinvestor10 wrote:

    And by the way, it should be noted that Threshold has 12 pipelines underway and up to nine combination therapies. People close to the studies are using the term "Holy Grail" in that TH-302 will likely end up being used in combination with every known therapy due to the minimal and sometimes non-existent side effects, or low toxicity and the significantly statistical boost in both OS and stunted progression.

  • Report this Comment On October 12, 2012, at 11:49 AM, cskbugsear wrote:

    It is nothing short of criminal the way that mgmt and the board have handled OCZ communications. If you read back through the last couple of quarterly reports, reference is made each time regarding their diminishing numbers as a direct result of the unavailability of NAND as the key reason. They site huge demand for their product, but make no mention that they have been offering rebates to the point that they could not possibly make money. There was no indication whatsoever that they were tapping into credit lines, etc., etc., etc. It is time that management and boards were held responsible for misinformation and misrepresentation of the facts. Where is the SEC in these situations? Powerless and not interested, other than in going after one or two companies and then holding their flag up high that they are doing their job! What a joke! Meanwhile, the shareholder gets wiped out while mgmt and the board collect their checks.

  • Report this Comment On October 12, 2012, at 1:51 PM, Symbiotic wrote:

    It's not like there were no red flags with OCZ. There were plenty. Some people just chose to ignore them.

Add your comment.

DocumentId: 2053341, ~/Articles/ArticleHandler.aspx, 4/23/2014 9:07:47 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement