Why Ply Gem Holdings Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of building products maker Ply Gem Holdings  (NYSE: PGEM  ) fell as much as 25% today after an analyst downgraded the stock.

So what: JPMorgan Chase analyst Michael Rehaut moved the stock from overweight to neutral, citing near-term operational challenges that "are likely to continue for at least one to two more quarters." A preliminary fourth-quarter sales estimate of $330 million-$335 million fell below JPMorgan's estimate of $365 million and that's enough to turn pessimistic on the stock.  

Now what: Short-term weakness or not, we're just at the beginning of a housing recovery and the long-term trends for Ply Gem are strong. Wall Street tends to focus on missing or hitting estimates that are only best guesses anyway, so it's really JPMorgan that had its fourth-quarter numbers wrong, not Ply Gem. I'll also point out that the market's reactions to downgrades are often short term in nature, while it's long-term profits that will drive the stock.

Look at the earnings trends in the fourth quarter, including a growing bottom line, because that's what will move the stock, not the opinion of an analyst at a big bank.

One stock to beat the market
There's a huge difference between a good stock, and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (1) | 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.

  • Report this Comment On January 13, 2014, at 4:36 PM, wallstr33t wrote:

    I thought the same as you when I purchased PGEM at $18. I hope you're right and I also hope JPM falls drastically for making stupid predictions like this.

    They, of all people have no room to talk. I'm beginning to wonder how much of their earnings are legal. They seem to be in trouble for different reasons every year.

Add your comment.

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: 2793251, ~/Articles/ArticleHandler.aspx, 10/22/2014 12:59:22 AM

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 3 hours ago Sponsored by:
DOW 16,614.81 215.14 1.31%
S&P 500 1,941.28 37.27 1.96%
NASD 4,419.48 103.40 2.40%

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

10/21/2014 4:02 PM
PGEM $10.75 Up +0.32 +3.07%
Ply Gem Holdings CAPS Rating: **

Advertisement