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 Solazyme (TVIA) crashed as much as 17% today, continuing a wild ride for investors. You can see below that the past year has been up and down but recently the stock's performance has plunged, and it's now at a 52-week low.
So what: What's interesting about this move, and many others in emerging technologies, is that it's not driven by any company-specific news. Stocks are just selling off dramatically, and high beta -- a measure of volatility -- stocks are taking it on the chin. There doesn't seem to be any rhyme or reason to which stocks are falling, how much they're falling, or why.
Now what: When you're invested in a highly volatile stock like Solazyme, this is one of the risks you take. In volatile markets when investors decide to flee a stock or industry it can be fast and swift and often without reason.
But this is where Foolish investors need to take a step back and look at the fundamentals of a company to see whether this is a buying opportunity or a deserved sell-off. In the case of Solazyme, the downside is that it lost $116.4 million a year ago and $77.6 million in the first half of this year as it expanded research and built out new production facilities.
We also have to consider that facilities providing upside potential are behind schedule, and there's no word on when commissioning will be completed for production in Moema, Brazil. As fellow Fool Maxx Chatsko points out, even the ramp-up of a 20,000-MT facility in Clinton, Iowa, may not be meeting investors expectations.
Here's where the good news comes in. Solazyme's shares are trading at about half of what they were in mid-June, meaning that investors buying now can get in with much lower expectations. If you were bullish on Solazyme this summer you should be even more bullish today. Solazyme is still an emerging player in a huge potential biotech market and it has yet to even scratch the surface of its potential. In my eyes, the payoff is binary, meaning the stock will either skyrocket or go to zero as losses persist, but the upside may be worth the risk.
It's times like this when everyone is questioning a company's future that fortunes are made. Sure, Solazyme is a risk, but it may be one worth taking after a day like today.
