Why STEC's Pullback Is Buyable

STEC Inc. (STEC) finally started a rebound on Tuesday after the same analyst who warned of competition last week - knocking the stock down $9 - raised estimates and said to buy.

More importantly, I emailed back and forth with my technology expert and here are his latest comments on STEC.

I didn't see anything mentioning Pliant having any contracts, partnerships or even shipping drives yet. Pliant just looks like a startup company, there are hundreds of these because SSD is the next big thing. Their drives claim to offer better performance but they are publishing numbers for preproduction parts…STEC is publishing data for parts that actually exist, work and are being sold…STEC has preproduction parts that are much higher performance than what they are shipping but they don't need to advertise that, they are advertising real drives that are making money. There are going to be lots of companies claiming to be able to make SSD drives while STEC is already shipping product. Unless you see something that says "STEC recalls defective drives" or something saying that another company is shipping drives to a major server manufacturer at a lower cost, and that company shows a profit, STEC is the play.

As big funds search for growth stocks, I would not be surprised to see STEC rebound back to $40+ in the coming weeks.

Disclosure: Long STEC

Comments

[speculari:]

If Will Shakespeare were around today, he might add stock "analysts" to the line about committing murder upon lawyers. Just a thought.

Sep 23 11:17 AM

[Financial S...:]

First mover advantage still has value, basically. When this thing pulled back from 36 to 30 it was time to load up. From 42 back to 28... load up again. Long STEC.

Sep 23 11:21 AM

[MadScientist:]

I absolutely agree. I did get in a little sooner than I should have (in at $31.95, ahead of two more days of dropping prices), but this is still is very good position for this stock, which should rebound up 20% from where I got in.

Sep 23 01:35 PM

[The Inflect...:]

Good insights. Chart needs some time to repair the damage but shorts will ultimately be forced to cover as Q3 guidance stands to be way better than expected after mgmt low balled estimated. Best, John

Sep 24 09:20 AM

[Gyoza Mimi:]

I hope it does rebound to above 40, then, again it will be an excellent shorting opportunity. I am kicking myself for closing a long Feb 10 PUT position yesterday, waiting for a rebound. The models suggested that it will rebound in a short-term to $35, and then down to below $20. It seems that rebound is less likely to take place. Too bad, but I am still hoping that $25 FEB 10 PUTs will drop to below $2 in the near-term.

Sep 24 04:16 PM

[notaspecultor:]

what about the 30% short interest
anyone know why stec is so incredibly shorted for over 2 months even with the good news

Sep 29 09:22 AM

[notaspecultor:]

the short interest is over 30%
with over 10m shares short

why is this the case

anyone explain what seems like an odd situation even more so as the price is over 25% from the high of 42 or so??

can the shorts drive the stock down more and if so any idea how much

with such a great company, am i missing something??

any comments
thanks

Sep 29 10:45 AM

[notaspecultor:]

stec owns the flash memory storage space
companies will say they have a product but no other company but STEC has had its FLASH TESTED BUY THE BIG BUYERS LIKE EMC, IBM ETC. AND IT TAKES AT LEAST A YEAR TO GET THROUGH EACH COMPANY'S TESTING PROCESS.

STEC'S FLASH IS FAR DIFFERENT FROM CONSUMER FLASH MEMORY AND I DON'T THINK ALOT OF PEOPLE REALIZE THAT FACT OR THAT THE HARD DRIVES IT REPLACES SELL FOR ABOUT $120K EACH AT LEAST THAT IS MY UNDERSTANDING.


THIS IS A UNIQUE SITUATION
STEC SHOULD HAVE A FAR HIGHER PE

Sep 29 11:25 AM

[notaspecultor:]

stec has moved up to over 28 after going down to about 25 or so...
now the shorts are running for the hills............how stupid a move it was to short stec..............these yorkels will never learn

Oct 06 08:56 AM

[Jeff Farley:]

The STEC party is over for sure after a poor outlook for Q4. Clearly many KNEW this was coming.

Nov 03 04:35 PM