CAPS Rating (out of 5)
|Dendreon (Nasdaq: DNDN )||**||(37.4%)|
|RealD (NYSE: RLD )||*||(21.4%)|
|Abercrombie & Fitch (NYSE: ANF )||*||(19.9%)|
With the markets rising 208 points yesterday, or 1.8%, stocks that went down by even larger percentages are pretty big deals.
That's going to leave a mark
Sharing with investors that your already struggling prostate cancer therapy was going to see its sales growth shrink in the future is not the way to get them motivated, so the 30% increase Dendreon saw this quarter with Provenge is as good as it gets for the remainder of 2011. Not very encouraging, particularly when additional prostate cancer drugs from Exelixis (Nasdaq: EXEL ) and Medivation will eventually be coming to market.
There's a short window of opportunity to capitalize on your exclusivity in the marketplace, and Dendreon's decision to go the marketing route without a big-name partner, along with pricing its drug at $90,000 a treatment, seems to have been a calculated error on the biotech's part. Investors rightly see the window slamming shut and they're getting out while they still can.
Dendreon can still salvage its position by educating doctors on the Centers for Medicare and Medicaid Services reimbursement policies, but the opportunity is narrowing. And the weak growth forecasts may very well be tied to the holiday season, as the Fool's David Williamson posits. It may take as much investor education as convincing doctors to prescribe its treatments.
CAPS member Azurik believes there's still time for Provenge to become the runaway best-seller it was hyped to be: "DNDN will outperform as Provenge becomes the blockbuster it should have been, once reimbursement program is clear to doctors."
Put Dendreon on your watchlist and see if it can yet live up to its potential.
In living color
The 3-D technology of today is far superior to its earlier iterations, but the problem is, there's just not much use for it in movies. How many times can we say "Oooh! There's a bullet coming at me!" or duck when someone throws an object at the screen? After a while it gets repetitious, and directors have been guilty of forcing the situation to make the greatest use of the technology. Avatar may have been the height of the experience (and that occurred almost at the start of its growth arc); Piranha 3-D may have been when the technology, well, jumped the shark.
The lack of consumer demand to see 3-D is leading TV maker Samsung to pull out of the market for the time being. 3-D technologist RealD reported its partner is no longer interested in bringing eye-popping visuals to the small screen, and though theater expansion, particularly overseas, is growing at a 35% clip, it actually fell well short of the 45% growth analysts had anticipated.
I think there's a warning in there that investors in IMAX (NYSE: IMAX ) and Dolby Labs (NYSE: DLB ) -- which owns 30% of the market -- need to heed. The latter itself has reported declines in 3-D sales, so we probably shouldn't have been so surprised that Samsung got cold feet about investing more in the technology. If it's not a success on the big screen, why pour money into televisions?
The dicey nature of whether 3-D was going to make it is probably one of the reasons that CAPS All-Stars are evenly split on the potential for RealD. Let us know in the comments section below or on the RealD CAPS page whether you think there's still a big future for the technology, and add it to your watchlist to be notified of all the latest developments.
Disconnecting from growth
Should it really be all that surprising that the tumult in Europe is upsetting Abercrombie & Fitch's expansion plans overseas? While its domestic operations seemed to have held up well, with same-store sales accelerating in the quarter, that wasn't enough to offset the collapse witnessed internationally. Europe, Japan, and Canada all experienced a decline, particularly its flagship stores in Europe.
Interestingly, Abercrombie's U.S. business fared better than Aeropostale (NYSE: ARO ) , which saw comps decline here by 9% (compared to flat same-store sales last year), but because it sees better profit opportunities ahead and raised its guidance as a result, Aeropostale's stock soared yesterday.
It's possible to look at Abercrombie's results and surmise it picked a poor time to expand globally, but having shored up its base here at home -- Hollister, abercrombie kids, and its namesake chain all reported rising sales -- it's also apparent that it's laying the groundwork for a better outcome in the future all around.
Still, with more than 1,100 CAPS members weighing in, a good 30% of them think it's a high-priced teen retailer that will stumble in a recessionary climate. Let us know in the comments section below whether you see Abercrombie rising above the tumult, then add it to your watchlist to see which way it goes.