How This Tech Stock Jumped and Slumped

Shares of Nam Tai Electronics (NYSE: NTP  ) jumped as much as 23% in pre-market actiontoday. But the bounce didn't last long. The stock started plunging as soon as the opening bell rang, and Nam Tai now trades 4% below Friday's closing price.

How can the same stock soar so high and then sink so low, all on the same batch of news?

If the classic beat-and-raise move always propels stocks higher, Nam Tai chose the equally proven opposite path. The electronics manufacturer blew the roof off the just-reported fourth quarter. Sales jumped 263% year over year to $468 million and gross profit margins expanded from 1% to 10.5%. The bottom-line impact of these twin improvements turned last year's $0.13 of net losses per share into a $0.80 profit per share.

The lightly followed stock didn't have to measure up to analyst expectations. I couldn't drum up a single earnings estimate among three trusted sources.

Maybe that's why the stock shot skyward on the earnings release, before management's forward guidance had a chance to sink in.

Nam Tai's own management doesn't expect the gains from 2012 to last very long. The company has doubled down on making LCD screens for smartphones, tablets, and displays for automobile dashboards. Even Apple (NASDAQ: AAPL  )  brought the company aboard its gravy train last year to supply display modules for the iPad Mini. Thanks to Apple's huge unit volumes, that's the kind of news that can move mountains -- and small-cap stocks. Nam Tai shares have more than doubled since Apple joined the party.

But there's a serious downside to this newfound laser focus. It's a notoriously competitive market with tons of large-sclae providers, and management fully expects a bumpy ride. "Customer orders will continue to fluctuate and its gross profit would also be under more pressure in 2013," says the press release.

Nam Tai did sell off a less successful flexible circuit board division to pin down these gross margin gains, but the margin boost may still be temporary. Investors hate uncertainty. And in case you hadn't heard, Apple's orders may not be the gold standard of gadget manufacturing success for much longer.

There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

Read/Post Comments (0) | Recommend This Article (0)

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.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2219818, ~/Articles/ArticleHandler.aspx, 9/27/2016 4:51:20 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...

Today's Market

updated Moments ago Sponsored by:
DOW 18,228.30 133.47 0.74%
S&P 500 2,159.93 13.83 0.64%
NASD 5,305.71 48.22 0.92%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/27/2016 4:02 PM
NTP $8.15 Up +0.11 +1.37%
Nam Tai Electronic… CAPS Rating: **
AAPL $113.09 Up +0.21 +0.19%
Apple CAPS Rating: ****