These 3 Stocks Aren't as Wobbly as They Appear

So close yet so far. The Dow Jones Industrial Average dropped 108 points yesterday after it was revealed the Fed may be losing its appetite for feasting at the table of quantitative easing. Although the economy appears to be doing better, unemployment applications just jumped higher than expected and housing starts were down in January from the month before, though they were up over last year.

The three companies below, however, reacted even worse than the index and led the way lower with double-digit losses.

Company

% Change

Millennial Media

(37.5%)

Oncolytics Biotech

(16.5%)

Mitek Systems

(14%)


Now don't go running over the cliff with them like a bunch of lemmings: It could just be a temporary situation. Let's first see whether they had good reason to fall, as panic-fueled routs can sometimes lead to excellent buying opportunities.

Two steps forward, one step back
Perhaps the inflection point analysts were anticipating the other day was one that was headed straight down, not up. Just a couple of days after Millennial Media (NYSE: MM  )  surged 14% on an optimistic outlook for the mobile marketing and advertising industry, the mobile ad agency was crushed following an earnings report that showed disappointing revenue growth and offered up weak guidance.

Although Millennial met analyst profit projections of $0.03 per share, revenues of $58 million came up short of expectations of almost $63 million. Management says it chose to forgo a number of smaller deals that could have helped push revenues higher and a few of the large ones it did pursue didn't close as expected.

As I noted the other day, the demographics for the space favor Millennial and other mobile marketers. Smartphones are ubiquitous and they account for 13% of all global Internet traffic, but it may require ad agencies go after accounts of all sizes if they want to succeed rather than pick and choose the ones they think are plum.

Raising the roof
Oncolytics Biotech
(NASDAQ: ONCY  )  was also the recent recipient of some bullish sentiment after it reported outstanding results from a small clinical trial it ran on lung cancer patients whose disease had metastasized or returned after being previously treated. And after it hit a high point on the news, it's not surprising that management chose to take advantage of it by tapping the equity markets for some quick cash. The only thing is, it priced its secondary offering at just $4 a stub, some 16% below where it was trading, and as often happens the stock plummeted to meet that lower price. No sense in paying more for the stock when the company itself isn't trying to get more than the lesser value.

The biotech is hoping to get $32 million out of the 8-million-share offering, but that's before underwriting expenses, and there's another 1.2 million shares waiting in the wings if the offering is oversubscribed. The proceeds it ultimately receives, however, will be used to finance its clinical trial program and a manufacturing program, and for general corporate and working capital purposes.

As of last September Oncolytics had just $28 million in the bank, and having spent a like amount in expenses over the previous nine-month period, there was the risk it would run out of cash before it reached the finish line of its clinical trials. Again, the capital-raising effort isn't such a surprise since it's a familiar occurrence, but you always expect companies to try to maximize the value they receive.

A pictures worth a thousand words
After watching all those commercials on TV about taking a picture of your check and making a deposit into your bank account via your smartphone, I thought Mitek Systems  (NASDAQ: MITK  )  would be a better performer. After all, it's one of the leading players in the space and has some of the biggest banks as its customers, but results haven't lived up to expectations and the stock languishes at just a third of its 52-week high.

Considering there was no company-specific news to account for yesterday's plunge, it probably helps explain why the stock rebounded about 8% in early-morning trading. That and the news that it had been granted a new patent related to paying a bill. Using Mitek's technology, customers can take a picture of their bill, have the relevant information create a mobile payment transaction, and then click "pay" to send off the money to the biller. As Mitek notes, it "eliminates the need for manual data entry, a checkbook or even a computer." 

I'll admit to easily being wowed by gee-whiz technology like this, but I find it hard to understand why Mitek doesn't trade higher than it does.

Ready for a resurrection
Want real technological change? Read all about the biggest industry disrupters since the personal computer in "3 Stocks to Own for the New Industrial Revolution." Just click here to learn more.

 


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