Resist the urge to high-five everyone in the cubicles next to you. Your stock may have just strapped on a rocket pack and taken off for the moon, but smart investors won't celebrate until they know that upward leap was justified. Without a fundamental basis for the bounce, these stocks can quickly make the return trip down.
Is now the time to lock in profits, or is this just the first step toward even higher valuations down the road? Let's examine several stocks that just hit the afterburners, and see whether they're truly headed into orbit.
The market made a quick reversal, bouncing back up 109 points, or 1%, after Friday's 115-point decline. So stocks that went significantly higher are pretty big deals.
Waiting for the last minute
Can adding just a few routes be worth $48 million? Apparently it can, if you're Republic Airways, and you're putting routes to and from Branson, Mo., on the itinerary for subsidiary Frontier Airlines. (Frontier announced nonstop seasonal service between Branson and both Austin, Texas, and Phoenix.) Along with Evercore Partners' upgrading the stock with a target price of $9 a share, there wasn't much else going on to account for Republic's big move yesterday.
The airline purchased Frontier almost two years ago out of bankruptcy and has been working on turning the carrier around. The plan is for Republic to turn over ownership to employees and have just a minority stake in the airline by 2014. It got pilots to agree to concessions that are part of a $120 million cost-savings plan that, if fully implemented, should allow Frontier to become profitable this year. Relief from high fuel costs would aid in the restructuring, as first-quarter jet fuel prices were 41% higher from the year-ago period.
Along with Frontier and Midwest Airlines, which it also bought in 2009 and folded its operations into Frontier, Republic offers regional airline service for American Airlines parent AMR, United Continental, and Delta
Highly rated CAPS All-Star goldminingXpert is hoping for real relief in oil prices later this year to boost Republic's efforts to rejigger Frontier: "Frontier will be a whole new animal when oil returns to $50/barrel this fall."
No doubt many All-Stars share that view, as 96% of those rating the carrier think it can outperform the market averages. Share your opinion on the Republic Airways CAPS page and follow its restructuring by adding the carrier to the Fool's free portfolio tracker.
There was even less reason for Fusion-io's gains yesterday, though several other recent IPOs, such as LinkedIn
As a result, it's hard to imagine those gains will hold. Although Fusion-io's storage technology has an impressive client list, with HP, IBM, and Facebook (its largest customer) all accounting for more than 10% of its revenues, the market has assigned it crazy valuations. It trades at more than 19 times its sales, where EMC
CAPS members are somewhat supportive, though more than a third of those rating Fusion-io's stock think it will underperform the broad indexes. Its one-star rating suggests they believe there are better places for your money.
Stay on top of Fusion-io's development by adding it to your free Fool watchlist.
Climbing out of the ditch
Speaking of Facebook, the Chinese version of it, Renren, also jumped yesterday, and also on no news. But SINA
Since Renren has been especially beaten down following its overhyped IPO, it's likely the stock got a bigger boost from a more favorable outlook for at least one Chinese social-media service. In addition to its networking site, it also operates a Groupon-style daily deals outfit, Nuomi, which was the one bright spot in Renren's recent quarterly report.
CAPS All-Stars are fairly evenly split whether Renren can beat the market, with empireruler wondering whether Facebook's own looming IPO will serve as a catalyst to depress the stock even further:
major issues and with great growth but no profits its hard to say its worth buying. what may happen is it will go to $3 a share and stay there for a very long time until it can gain some sort of profit. and when facebook does go public it could be a catalyst for this stock to fall even further as people rotate out of this social network and into facebook
Add Renren to the Fool's free portfolio tracker to see if it can network its way higher.
Going into orbit
That's why it pays to start your own research on these stocks on Motley Fool CAPS, where you can read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from the stock's CAPS page. Then you can decide for yourself whether your stock's headed for reentry, or off to infinity and beyond.