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Can Motricity Regain Its Multibagger Momentum?

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For most of 2010, investors have loved Motricity (Nasdaq: MOTR  ) . And why not? It's an intriguing stock story.

AT&T (NYSE: T  ) , Sprint Nextel (NYSE: S  ) , and Verizon (NYSE: VZ  ) are all under pressure to deliver higher-margin value-added services. Motricity offers that via custom content. Users pay to get data delivered that's tailored to their specified interests.

Big-money buyers like that pitch: Motricity shares have more than doubled since the June IPO. Yet there are signs that investors' love affair with the stock may be ending. Shares of Motricity are down more than 16% for the week.

Several All-Star Fools have recently shorted the stock in Motley Fool CAPS, including amyers1, orhein, and RedondoGolfer. These and other bears sense Motricity has risen too far, too fast. Also, next week marks the end of the IPO lockup period that prohibits insiders from selling shares for a quick buck.

"[Motricity's] 180-day selling restricted period soon comes to an end. More than 100K shares were sold in five minutes this morning below $30," Foolish investor cashsage wrote on Dec. 1.

Fools fear that insiders will dump Motricity as soon as they're able, creating a wave of selling that would send the stock careening back toward to its pre-IPO price of $10 a share.

I doubt we'll see that much of a drop, but Motricity's situation is hardly unique. Another tech IPO from earlier this year, Qlik Technologies (Nasdaq: QLIK  ) , suffered a sell-off after management announced a secondary offering designed to allow its private equity owners to cash in some of their gains.

Frankly, I'm hoping the bears are right and Motricity suffers a short-term sell-off. I'm convinced there's enough long-term growth here to deliver multibagger gains.

The math convinces me. Analysts are forecasting that normalized net income will rise sevenfold over the next two years. Even if you assume they're too optimistic -- and they usually are -- Motricity's forward valuation of 35 times earnings looks cheap for a company growing at such a rapid pace.

Now it's your turn to weigh in. Is Motricity overpriced? Please vote in the poll below and then leave a comment to explain your thinking.

Interested in more info on the stocks mentioned in this story? Click here to add Motricity to your watchlist. Click here to add Qlik Technologies to your watchlist.

Qlik Technologies is a Motley Fool Rule Breakers recommendation. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy is motoring.

Read/Post Comments (3) | Recommend This Article (6)

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 December 10, 2010, at 10:30 AM, elmoaustin wrote:

    Read the comment on QLIK that there was a selloff after the secondary announcement. I don't see a drop from 24 to 23 on low volume as a selloff. it looks more like the natural trading range of this stock. If anything the technicals on it seem to indicate that it is trending up and could be moving to new highs soon, with a floor of 23 now established by the secondary pricing.... just a Fools take on it!

  • Report this Comment On December 10, 2010, at 11:32 AM, shoofly2 wrote:

    Insiders sold $291.80M in stock (open market) and options this a.m. The CEO reduced his holdings by 33%, 6 insiders sold in all. The strange part: they all sold @ the same price, $21.94. Thoughts?

  • Report this Comment On December 10, 2010, at 1:46 PM, elmoaustin wrote:

    The Form 4s that you are talking about are (I believe) the secondary offering that was just completed.... the info on the form states this transaction was done Dec 2, which would correspond with the secondary. this would also explain why all are the same price.

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