Earnings season begins anew and doubts about the strength of the economy still filter through expectations. A combination of anemic results and weak guidance led the Dow to fall by 128 points yesterday, or 1%.
Yet some companies fell even further, dropping by double-digit percentages. While the rout could be warranted, sometimes it's just a lemming-like response to a temporary situation. So let's see whether they had good reason to tumble as panic-fueled declines can sometimes lead to excellent buying opportunities.
|
Company |
% Change |
|---|---|
|
OCZ Technology (NASDAQ: OCZ) |
(40.3%) |
|
Threshold Pharmaceuticals (NASDAQ: THLD) |
(11.7%) |
|
ParkerVision (PRKR 4.54%) |
(9.5%) |
A solid mess
Maybe they just gave away the store. Going for market share against industry leaders Seagate Technology (STX +0.00%) and Western Digital (WDC +5.88%), solid-state drive maker OCZ Technology was crushed by news it was delaying filing its financial reports because of problems surrounding its customer incentive programs that are leading to a "significant" loss quarterly loss. The CEO apparently boosted rebates and price discounts to such a degree that revenue was materially affected, and while he abruptly resigned last month for unspecified reasons, it's clear now he had lost control of the company he founded.
Now the drive maker is stuck with a credibility problem because last month it blamed the reduced revenue situation on a NAND memory shortage. Having gone all-in on the SSD market a year ago, it was under pressure to perform and prove the bet was smart. With SSDs the drive of the future, I had rated OCZ to beat the market on Motley Fool CAPS, the 180,000-member driven investor community. Bad call. The stock's dropped 70% since then, compared to a 15% gain in the S&P 500.
The big bet obviously created an environment that allowed the envelope to be pushed too far. The board of directors ultimately bears some responsibility for not reining in the CEO sooner, but it will have to pick up the pieces from this debacle.
In my mind, there's little hope OCZ will survive in its current state, so I'll be closing out my CAPScall on it. If rumors ultimately prove true that Seagate wants to buy it, the drive maker could get a bounce. I don't think that will happen any time soon, but tell me below in the comments box what you think will be the fate of OCZ Technology.
Lies, damned lies, and statistics
There was no specific-company news that sent shares of biotech Threshold Pharmaceuticals tumbling more than 11% yesterday, but it's been falling ever since reporting less-than-positive results for its experimental cancer therapy TH-302.
Two weeks ago, Threshold updated the results and reported patients treated with a larger dose of the drug survived 9.2 months while patients receiving a smaller dose lived for 8.7 months. That compared favorably to the 6.9-month survival rate for those only being treated with Eli Lilly's (LLY 2.11%) Gemzar. Sounds good, right? Except the trials weren't designed to say if this was statistically significant, and when "crossover" patients are removed -- that is, patients who began taking TH-302 after their tumors started growing again -- the results get distorted.
The stock, which had been trading just north of $9 a share, has lost more than 40% of its value. There's a $1.5 billion market staring Threshold Pharmaceuticals in the face for its pancreatic cancer drug, and that's just in the U.S. Considering the many risks biotechs face in navigating these trials, do you think the it will come out successful at the end? Let me know below.
Vision quest
Wireless chip maker ParkerVision also moved lower on no company-specific news, but there's a lot of moving parts here. In addition to being a heavily shorted stock (days to cover stands at more than 18 days, even though that's lower than where it was two months ago ), it recently closed a stock offering of 4.3 million shares at $2.30 each , and it's locked in a patent infringement lawsuit with Qualcomm (QCOM +4.57%).
Despite the challenges, some analysts are convinced it can still prosper even if it ultimately loses the lawsuit, though the optics are much better if it's successful. The market opportunity is around $10 billion, and with just a minuscule fraction of the total, ParkerVision could generate $120 million annually . But its radio frequency chipset won't hit the market till next year, so the stock is sure to be volatile in the meantime. Keep an eye on this mobile chip maker by adding it to your Watchlist.
