The 6 companies described below experienced price movement throughout the day on Wednesday. I have discussed the reasons in which I believe this movement has occurred and my opinions regarding the direction of each company. Some offer a good opportunity with the potential for high returns and others I believe should not be bought at this time regardless of it's position. Within this market finding value in stocks could prove more valuable than any other strategy for producing profit and some of these stocks, I believe, are in a perfect position to see these long term gains.
Cell Therapeutics (CTIC) posted impressive gains throughout the day as excitement builds around this company. On July 28 the company announced earnings along with the company's plan to resubmit Pixantrone, the company's already denied drug, with no new clinical trials for approval. A decision date for potential approval could come as early as April of 2012. The company appears confident that it will receive approval, as it has significantly strengthened the balance sheet with $30 million dollar in financing which will assist the company in marketing and further pipeline developments.
I remember when the drug was denied back in April of 2010 and the reaction it received from the market. The stock lost most of it's value as soon as the halt was lifted only to pop back up to counteract the unbelievable number of investors who sold. The FDA basically denied the application before the process even started because the company did not follow guidelines for the design of the study. The company has completed all aspects of clinical trials and received, mostly, positive data to back the drug. Yet I ask myself what has changed? The drug was not approved but is receiving a second chance without having to complete new clinical trials? It does not make sense, and I fear it could be false hope for the company's investors. But maybe I am wrong and the company will present it's data, receive good feedback, and be granted the right to manufacturer Pixantrone. Yet with no recent clinical trials and the same issues hanging over the company's head I believe we are going to see a company with a good drug and not enough money or support to complete the necessary steps to gain approval. As the date nears the stock will probably rise as excitement will build which could give investors a nice return. However, I would suggest not holding the stock until the date of the decision. I do not believe enough has happened to secure an approval and if denied the loss would be devastating.
Travelzoo (TZOO) is trading with a loss of 10% which adds to the 50% loss in only one month. The company has been trending lower ever since it announced earnings on July 21. The company posted revenue of $37.6 million and earnings of $0.30 per share. Based on these results you would expect to see gains; however, Travelzoo experienced a loss of 34.66% after missing the numbers set by analysts who cover the stock. There have been no significant developments to cause the stock to continue falling at this rate, other than a downtrend within the overall market. I do not see Q2 as a miss but rather a 34% gain in revenue year over year. I was impressed that the company expanded into 27 new local markets during the quarter. This means Travelzoo was expanding into more than two markets per week. Expansion at this rate is expensive as the company must hire, train, and place employees at a constant rate. The 2nd quarter was not a disapointment it posted gains in almost every financial category as the company continued it's trend of growth and development. With lowered expectations TZOO should easily outperform and leave this downtrend as nothing more than a distant memory as we approach Q3 earnings report. At the current price of $37 I would consider purchasing this stock with the expectation of seeing short term loss. I believe this company will return great profits for those who invest at the current prices since the earnings keep getting stronger and the company continues to grow larger.
Photoronics (PLAB) announced 3rd quarter earnings which resulted in a current gain of 29%. The company posted record sales of $135.9 million a gain of 21% year over year along with non-GAAP EPS of $0.23 a gain of 119% year over year. The company's high end IC photomask sales increased 24% year over year which shows the company's success within it's business model. PLAB announced revenue guidance for the 4th quarter in line with expectations.
The company is on pace to exceed $500 million of record sales during 2011. The company will most likely exceed this number since it has outperformed earnings during the last five quarters. I expect the stock to keep rising from this point, the stock was trading low after seeing loss during the markets downtrend. This news has allowed the company to regain a portion of it's loss but I believe the real value is long term. Much emphasis has been placed on the company's balance sheet as it has cut a great amount of debt over the last 3 years. I will continue to watch this stock as I believe the company has a solid business plan in place along with growth strategies for the future. I would not be surprised to see the company make a large purchase in the near future to accelerate growth even faster. For investors who are interested I would consider purchasing the stock at it's current price. I expect to see new highs in the immediate future as earnings continue to surprise.
Sprint Nextel Corporation (S) has gained more than 16% over the last 3 days including a gain of almost 4% today. The stock is still trading down 30% for the month therefore the gains are most likely a correction. The only development from the company has been from analyst upgrades which may have sparked the stock as well. These upgrades form around the idea that Sprint is undervalued and with low expectations the company should outperform. I completely disagree with this opinion, I do not care if the company adds subscribers all I have to do is look at the financial reports for the obvious truth. Sprint has lost 20% of it's revenue since 2007 with it's net income being substantially worse in 2010 compared to 2009. I do not remember the last time that Sprint posted a year of positive income. The company's assets continue to decline while it's debt remains the same. I believe the company's operations revolve around the idea of removing assets to keep debt from increasing to cover the true effect of a company that cannot produce a profit. This concept or strategy may work for a while but eventually will cost the company. With AT&T (T) and Verizon (VZ) getting stronger every year and Sprint seeing no income from Apple's success the stock will fall further. I believe that of the large communication companies Sprint is by far the worst company of them all, and I can not understand how anyone would upgrade it's stock. I expect Sprint to continue unloading assets, sustaining debt, while producing no profit for many years to come therefore I can not see any value in this company.
General Motors (GM) fell nearly 3.5% after being downgraded in almost every possible category. When analyst upgrades or downgrades a stock it almost always has an effect on the price. I can understand the thought process behind a downgrade of GM and other auto manufacturers alike but for GM I feel the timing is off. The company just announced one of it's best earnings report showing growth and did not indicate any real hint at a major decline in business. The company is already trading with a price to earnings ratio of 5.41 and is trading near the same levels as when it announced earnings. The company had strong earnings that posted profit that nearly doubled and revenue that grew by 19%. Therefore I would buy on this news but understand that GM is a long term investment. The market is not going to be forgiving towards the company and it's performance in 2008. Even though the company is now profitable and has eliminated a good portion of it's debt many investors are not sold on GM or the automotive industry as a whole. I strongly believe that purchasing this stock will prove to offer great returns over the next 4 years as earnings will improve along with investor confidence increasing the P/E.
Amarin Corporation (AMRN) lost nearly 5% of it's value today and will probably trend lower tomorrow. This biotechnology company trades with a lot of potential as investors are optimistic regarding the company's chance of receiving FDA approval for it's drug AMR101. The stock has seen gains of more than 380% during the last year as investors are excited about the company's future. The company has experienced a great year with it's pivotal phase 3 trial returning positive results with all indications pointing towards an approval from the FDA. The company has indicated that several companies have shown an interest in buying Amarin which have excited investors even more.
The company's drug AMR101 is loaded with potential. The drug would treat high levels of triglycerides, a fatty substance in the blood related to heart problems. Some have estimated annual sales exceeding $2 billion as the company estimates 150 million people with high Triglyceride levels. The company believes that 34 million out of this group may use the drug.
I expect the stock to substantially decrease over the next few days with the latest news regarding patents. The U.S. Patent and Trademark Office rejected the company's application for a patent covering the company's experimental drug. I believe this news to be relevant as stock holders will view this as meaning the company will not exceed the high expectations in revenue if the drug is approved. This fear will come from the idea that another company could produce a drug such as AMR101 and benefit from the large market which means shared revenue. I find this unlikely and I believe the company will eventually receive a patent for the drug since a rejection letter was not available and it is unknown if the decision is correctable.
An investment in this company could prove to be very valuable with large returns. I have always been skeptical of buying into a stock that trades on pure speculation. However, if the price falls low enough I would consider buying this stock with a small position. The company has potential and a strong likelihood of being approved but could slip much lower. The company's market cap is $1.58 billion, if the drug was to not be approved the loss could be devastating. Yet, with such strong potential it does not make sense to not hold at least a small position. The upside is too strong and the likelihood of being approved is too great therefore it makes sense to invest in this stock which has the potential to return large gains for many years to come.
Additional disclosure: I may intiate a long position in TZOO over the next 72 hours