Please ensure Javascript is enabled for purposes of website accessibility

Why Cray, Inc. Shares Plunged

By Steve Symington – Feb 18, 2014 at 9:51PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Is Cray's drop meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: In the first trading day since jumping 39% to close last week, shares of Cray (CRAY) fell nearly 14% Tuesday.

So what: Though Cray admittedly turned in impressive fourth-quarter results and encouraging forward guidance Friday, the rise was so big it's hard to be surprised at today's pullback.

In fact, with shares trading at 48 times this year's expected earnings, that's exactly why I suggested at the time "investors would do well to let the dust settle before making any decisions about buying Cray in the near term."

Now what: On a more positive note, bullish investors who missed the pop but were patient enough not to dive right in have been presented with a much more attractive long-term entry point. Even so, I still don't think Cray is particularly attractive with the stock currently trading around 44 time last year's earnings and 36 times next year's estimates. As a result, I'm more than happy to continue watching from the sidelines for now.

Steve Symington has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Amazon.com. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

Cray Stock Quote
Cray
CRAY
Amazon.com Stock Quote
Amazon.com
AMZN
$94.13 (-1.44%) $-1.37

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.