With no economic data on the table today investors' eyes were clearly focused on what's going on around the globe, and used that uncertainty to push the S&P 500 (SNPINDEX:^GSPC) modestly lower on the day.
The two big concerns for investors revolve around fighting in the Gaza Strip as well as the ongoing investigation into the downed Malaysian Airlines commercial plane MH-17 over Ukraine. Investors worry that a rift between Russia and the rest of the world, as well as between Israel's allies and enemies, could disrupt global growth prospects.
Investors are also clearly anxious ahead of the release of more than 100 earnings results this week from S&P 500 companies. The expectation is that we'll witness a nice return to growth following disastrous Q1 results that were marred by the polar vortex. But, no one is quite sure what to expect when it comes to guidance with the Federal Reserve pointing to a less lax interest rate stance in the coming months. Needless to say, this could be a volatile week.
By days end the S&P 500 had recovered much of its early morning losses (it had been down more than 12 points) to close down 4.59 points (-0.23%) at 1,973.63. Despite it being a decisively gloomy day, three small-cap stocks still found a way to surge noticeably higher.
Topping all gainers today was fuel-cell system developer Plug Power (NASDAQ:PLUG) which surged 13.1% after Roth Capital spoke positively about the company. Specifically, Roth Capital analyst Matt Koranda is more confident that the company will meet or exceed its 2014 booking targets and that more shipments will lead to more robust gross margins. That doesn't mean Koranda isn't still concerned about Plug's valuation, which coerced him to leave a neutral rating on the company, but he believes that its near-term outlook has improved.
I would certainly be in agreement that a lot of factors have worked in Plug Power's favor over the past year, including landing an elephant in Wal-Mart. Plug Power's deal to supply more than 1,700 fuel-cell-powered forklifts in six Wal-Mart warehouses is one of those key deals it can use as leverage with other large clients looking to make the same move to save money over the long run. However, Plug Power is also only expected to be marginally profitable at best and hasn't shown the ability as of yet to consistently attract new contracts. Until we see more cash flow consistency I'd suggest this is a stock best left to the traders.
Electric-vehicle and all-terrain vehicle manufacturer Kandi Technologies (NASDAQ:KNDI) was once again back in the news, advancing 10.1% after a Chinese newspaper reported that sales tax breaks on EV's would not be available to consumers on vehicles purchased outside the country. According to China Daily, EV buyers in China will not have to pay the sales tax from Sept. 1, 2014 through Dec. 31, 2017 as long as they buy an EV that's made in China, such as those made from Kandi Technologies. The thought here is that it could help reduce competition for domestic producers which may give Kandi room to run even higher.
As I've stated previously, I'm still not sold on Kandi. Although Kandi announced a huge surge in EV production from the sequential quarter in the prior week, there's not much consistency to its production figures. What concerns me more is that it lacks the brand-name that a Tesla Motors or Nissan has. Both Tesla and Nissan have expressed interest in selling their EVs in China, and they have far deeper pocket books than Kandi. I just don't see tax breaks being able to keep these global automakers out of the Chinese EV marketplace. The uncertainty surrounding Kandi's ability to stand up to formidable competition will keep me parked on the sidelines.
Finally, free-to-play mobile game developer Glu Mobile (NASDAQ:GLUU) is once again making waves, up another 10% on speculation that its Kim Kardashian: Hollywood game could deliver up to $200 million in peak annual revenue. Although Glu's games are free, it does earn revenue from dedicated gamers that want specific game perks and are willing to pay for them. If analysts are accurate with Kim Kardashian: Hollywood's potential, then Glu could see its revenue double over just the next couple of years.
As for me, I'm not buying it. The free-app business has a number of flaws. To begin with there's no guarantee that users will step up and purchase premium services on a quarterly basis. Also, not all developed games prove successful, so investors have to assume there will be games that flop badly. Finally, it's a simple case of valuation. At well over 30 times 2017's EPS at the moment Glu Mobile is looking extremely frothy. It wouldn't take much for gamers' interests to just as quickly push Glu Mobile out of the limelight, which is more than enough reason to suggest that investors consider taking their profits here.
Sean Williams is short shares of Tesla Motors, but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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