November 17, 2010
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||Power-One (Nasdaq: PWER )
||Oct. 31, 2010
|Stock Price At Recommendation:
|Competitors and Peers
Emerson Electric (NYSE: EMR )
Tyco Electronics (NYSE: TEL )
Digi International (Nasdaq: DGII )
Sources: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and Motley Fool CAPS.
This Week's Pitch:
Power-One, Inc had one of the most volatile post earnings days that many of us have seen in a long time when they announced earnings after hours on Thursday, (21 October, 2010). They beat analyst estimates handily and afterhours and premarket were up over 15%. By the end of the day they were off over 6% from Thursday's close, or a net delta of a 20% plus swing. There are several theories why this occurred. Key in the equation is the huge short interest this company has, partially due to some bonds and other financing, and partially due to their meteoric climb from $2.52 to $10.00. It is likely some of the shorts panic'd and covered Friday morning. Power-One's largest sales/revenue gains were in products used by the solar business. The Solar industry also took a huge hit Friday, First Solar [ (Nasdaq: FSLR ) ] was down 8% which also certainly contributed to the reset downward of Power One. Theories abound and are well documented on Power-One's wild ride Friday. Much of the solar business hinges on subsidies in European companies which could expire and not be renewed. Other companies in competition ([Satcon Technology] (Nasdaq: SATC ) ) are indicating pricing/margin pressures.
All in all, however, while I'm usually skeptical of a company that rises 5X in the course of a year, Power-One is forecasting a great quarter next quarter as well. They are bringing on more manufacturing capability and improving their product with a 3rd generation release. It's hard to believe that 38 Million shares traded hands Friday at a loss to the net share price after a company beats all analyst calls, guides upward, and has a forward P/E of sub-5 and a P/S of sub-1. Prior to their last few positive quarters, Power-One was losing money, so I do understand a lack of full investor confidence, but I suspect mutual funds and other's, willing to play this one "long" will swoop in on this one. My real life buy was much lower than my CAPS call, but I intend to hold "both" long.
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