Prior to Monday's market rally, stocks had been rather weak lately. Bad news out of Europe, combined with a bad loss from JPMorgan (JPM), and a less than spectacular start to Facebook's (FB) trading as a public company, all had markets on edge. Many stocks had declined heavily, and those already beaten down continued to fall. Today, I'm going to re-evaluate five names, all of which hit new 52-week lows on Monday, before rallying with the market. I've covered many of these in the past, and it is again the moment to question whether now is the time to get in.
Green Mountain Coffee Roasters (GMCR):
Green Mountain got crushed after its bad quarterly earnings report, and shares have continued to go lower, hitting a new 52-week low Monday morning at $23.35. I said that I would look at the name once it dropped into the $20 to $25 range, and here we are.
I still would be hesitant to purchase shares in the name, because I think it will make a run at $20 before it completely settles down. Expectations have come down for both the quarter and fiscal year (which ends in September), but I would like to see shares come down more. Revenue estimates for the quarter stand at $871.63 million, not quite at the low end of the $861 to $897 million range provided by the company. Given that the company has missed revenue numbers by a tremendous amount in two of the prior three quarters, I want to see estimates come down to at least $865 million before I start buying, and realistically, even more than that. I still don't believe the company's guidance at the moment, so I would like to set up a scenario where they almost can't miss the target. Until then, I am not a buyer.
Research in Motion (RIMM):
Research in Motion broke $11 last week, and we did hit a new low of $10.87 before the market turned on Monday. I've heard RIMM bulls argue that this name is worth $50 right now (yes, people are saying that), but I disagree. I think the name goes lower, and that it is only a matter of time before we see single digits.
Analysts currently see revenues falling 18% this fiscal year (ending next February), which is pure speculation since the company stopped providing guidance. However, RIMM's phones are losing market share, and the recent Blackberry 10 show did not help send the stock higher. It actually went lower. RIMM needs to get the BB10 phones out sooner rather than later. It would be extremely beneficial to shareholders if they were out before the iPhone 5, but that might be a stretch. At the least, they have to be out for the holiday selling season. If RIMM misses that, then this company is completely doomed.
We still have about 5 weeks until the company reports its current quarter (June 28th looks like the date), so I wouldn't be surprised if there were efforts to prop up the stock before then. Whether it is another round of buyout rumors, or some insider or director buying shares, I feel like the company will want the stock to get back to $15 rather soon. Should that happen, it might be shortable again. Till then, I would stay on the sidelines and not get caught in a sharp move in either direction.
First Solar (FSLR):
Just a week ago, I continued my short stance on this name, showing why perception does not always equal reality. At that point, the name was above $16. I thought there was still some downside in the name, but I didn't see it falling $3 in less than a week. It did, hitting a new low of $13.36 Monday morning. This name is now down more than 90% in less than 14 months. I'm almost wondering if it is now a buy.
The problem is that serious questions remain. While this remains a top name in the sector, it is a sector in deep trouble. First Solar has missed earnings estimates by at least 15% in each of the past four quarters. That is quite impressive, if you actually think about it, for a company that use to crush estimates. The stock has actually lost $10 per share over the past two quarters when you factor in all of the charges they have taken. Investors are also weary of management, who did not provide revenue guidance, and raised earnings per share numbers for 2012, despite posting a loss and widely missing estimates for the first quarter.
Bulls will keep telling me that I'm wrong, that you have to buy here, but they have been saying that every $2 or $3 downwards since $45. Yes, there will be many to defend it, but nobody seems to actually be buying shares. Every time this name starts to pop, it gets knocked right back down. I can't recommend owning it until the company gets some of its issues cleared up, and that might be several months away.
Shares of the rare earth mineral producer and processor staged an impressive rally after Monday morning's low of $19.38. Molycorp is still in its high growth phase, showing huge growth in revenues and earnings. However, quarterly reports have come in mixed, with the company not meeting results every time. That has knocked down the stock from its 52-week high of nearly $67.
But the latest fall came after the company announced a huge debt offering, which it recently closed on. The company sold $650 million of debt, which seems to have concerned investors. Remember, the entire market cap is just barely over $2 billion, and total liabilities on the balance sheet were just $456 million at the end of last quarter. Molycorp is mostly using the proceeds to finance its acquisition of Neo Material Technologies, a very ambitious purchase for such a small firm.
Ninety days ago, analysts had this company posting $5.76 in earnings per share in 2013. Now, those estimates have been nearly halved, down to just $2.95. Like I said before, consistently missing estimates has been a problem. The average analyst price target is $37.60, almost a double from here, but the average rating is a slight buy and maybe even a hold. This company could be a tremendous buying opportunity if it can hit its marks, but it has been unable to do so in recent times.
So much for the Facebook rally. I admit I was wrong about Zynga, as I thought it would hold up much better, and rally into the Facebook IPO. Zynga shares started downward after the company's late March acquisition of Omgpop, maker of Draw Something. It has since made more acquisitions. However, recent worries about declining activity in some of its top names have sent shares spiraling lower.
Zynga shares have continued lower over worries about Draw Something and the company's soaring R&D costs. Shares were almost at $9 last week, but with Facebook not seeing a pop, shares of Zynga have plummeted since. The stock hit a new low of $6.36 Monday morning when Facebook shares kept dropping. The name rebounded back over $7, but if Facebook continues lower, this name will definitely fall in sympathy.