At the conclusion of each week,VFC's Stock House examines some news items, stocks and stories that made headlines during the previous trading week, but may also make headlines or influence trends during the upcoming week as well. Last week opened with a pure focus on the tumultuous dive experienced by the market during the previous trading week, but encouraging headlines and positive signs from Europe reversed the downfall and the stock market as a whole ended up enjoying its best week of the year.
The question for the upcoming trading week is...will the 'rebound run' continue? A lot of that depends on news from Europe, a popular trend these days. Given the dramatic market volatility of the last two weeks, one would believe that the news from Europe had flip-flopped in a big way from one week to the next. To the contrary, however, nothing really changed all that much regarding the calamity that is the eurozone during that time period.
The uncertainty surrounding Greece and its potential exit from the euro is still there-- and was last week, too, as elections that will more wholly predict the course of action that the country will take regarding its recovery have yet to take place. Spain is still a credit and debt mess while its banks struggle to stay afloat. It's predicted that Spanish banks will need an injection of tens of billions of euros just to remain solvent. Portugal and Italy continue to balance on the edge of the cliff that would have one of those countries becoming the next huge threat to the vibrancy of the euro, and it's still unclear exactly how French President Francois Hollande will tackle his disagreements with the measures imposed on Europe by Angela Merkel of Germany, given that his country also has parliamentary elections pending.
Since all of that news was just as relevant last week as it was the week before -- and the one before that, and the one before that -- it's more likely that the extreme volatility we're seeing lately is a sign that the traders and opportunists are playing on the short term reactions of investors who trade the constantly-shifting sentiments emanating from the large financial media outlets.
One minute the headlines predict gloom and doom thanks to the European crisis and the next minute things just ain't so bad.-- pundits are highly indecisive these days. Don't expect that to change much moving into the next trading week, and expect speculative discussion on the situation in Europe to continue leading into the 17 June Greek elections. The French parliamentary elections will also be in full swing this week, pinning the focus cleanly on Europe, which means that continued volatility is likely and another swing south could also shape up pretty quickly.
The focus on Europe doesn't have to be all about economic nervousness. UEFA Euro 2012 is in full swing as of this weekend, and will provide an escape for all of those who have had enough of the politicians and economic pundits, although if the Greek team doesn't fare well then it'll just be another reason for the rioters to take to the streets again. Portugal-Germany, Spain-Italy, and England-France are the games of the week for this round.
Let's move onto the stocks and stories to watch...
Implant Sciences (IMSC.PK): It may be prime time to take a keen look at Implant Sciences. Implant has been swiftly making a name for itself as a major player in global security with its explosive trace detection technology. A key approval expected to take place towards the end of the summer could launch the company into a new phase of validation and cement its place as a household name in the arena of homeland security.
All year long, shares have been on the rise as the company's name and products have spread across the globe, highlighted by a move to a dollar when the company's Quantum Sniffer QSB220 technology was selected to take part in a layered defense plan in Cartagena, Colombia for the Sixth Summit of the Americas a couple of months ago. While it was America's Secret Service that stole the show at this ordeal, Implant Sciences quietly played a role in ensuring the security of 34 heads of state of the Americas.
Such international arrangements have become commonplace throughout the year. Already in 2012 Implant has announced deals to employ its technology in China, the Middle East, Eastern Europe, Africa and other areas in a addition to the already-noted use in South America. While such deals are encouraging enough that the company's technology is quickly gaining credibility and support around the globe, the real news and move to the mainstream could come later this summer when the Transportation Security Administration (TSA) is due to announce a decision on approval of Implant's technology for use in the United States.
Needless to say, a positive approval decision from the TSA would open up a considerably larger market for the company and could provide a catalyst as significant to Implant as a positive drug approval by the FDA for a small pharmaceutical or biotech company. Additionally, many countries and entities around the globe base their own security approvals on decisions rendered by America's TSA, so the potential market for the Quantum Sniffer (QS) technology post-TSA approval drastically increases.
Implant's technology has significant advantages over competition that is already on the market and positions the company to quickly become THE recognized leader in airport and air cargo security, for starters. Maybe most significantly is the fact that the QS technology uses no radioactive particles, while the competition cannot boast such claims. This is a key fact when considering the additional licensing and regulatory considerations when using the competing products, and that's not to mention the safety concerns also associated with their use.
Additionally, the quick "clear down" in Implant's technology means that the QS is ready to test another sample within seconds, a huge benefit when conducting "assembly line" testing, as would be the case for air cargo and/or airport screening. Another key date to remember is December 3, 2012, the date when the TSA mandates that ALL air cargo on passenger airliners will be screened for explosives. If Implant does receive an August approval for the use of its technology, then the impending December date means that revenue could quickly start rolling in.
Given the progress already realized by Implant this year, and given the key catalysts that could unfold within months, now is the time to take a good look at the potential of this company. Any pullbacks along with the market volatility experienced over the past couple of weeks could open up quite the buying opportunity.
Apple (AAPL) and Google's (GOOG): The tech wars are heating up, and the news that Apple is prepared to launch its own mapping application to compete directly with Google's Google Maps could be worth watching. Not only is this move by Apple an escalation of an already tense competition between the two juggernauts, but it could potentially cut into a significant revenue stream for Google.
By no means would this be a potential 'nail in the coffin' for Google, but a mass shift from its mapping software could be enough to hurt. Meanwhile, Google - as always - is evolving and may have plans to offset any threats from Apple. The purchases of Quickoffice-DJ and Meebo Inc earlier this month grow the company's influence in mobile presence and social media networking, respectively. Both of these companies have held up fairly strong through the volatility and should always be considered stocks to watch - if only for the 'what can they possibly come up with next' aura that surrounds them.
Meanwhile, an expected trial between the two during the coming week will not be a story to watch, as a U.S. Circuit Court Judge cancelled the event and is expected to dismiss both claims.
Capstone Turbine (CPST): Capstone Turbine, with its low-emission microturbine units gaining steam in the clean energy sector, will be in the spotlight on Thursday with an earnings report that comes out as margins are increasing and the company's backlog of orders is growing. The company has been inching towards profitability for a few quarters now, and investors will be looking for signs that the positive trend is continuing.
While revenues and future prospects for the company have been on the rise, the share price has not. After pushing to the two dollar mark last year following a mention by U.S. President Barak Obama during a speech in Brazil, CPST has continued on a downward slide that could not even be reversed by a positive CEO interview on CNBC a couple of months ago.
Historically, purchasing shares of CPST at right around the dollar mark has proven to be a successful strategy. Profitability is ultimately the holy grail for this company, but until that achievement is reached, continued volatility is likely. That said, any additional encouraging signs on Thursday could spark a new round of growing investor interest. Capstone also has an intriguing relationship with General Electric (GE) that is worth monitoring.
Sirius XM (SIRI): Shares of Sirius XM have been trading for under two bucks for the better part of a month now, and judging by the number of bearish articles published about the company thus far in June from various financial media sources, the once-positive sentiment surrounding the company could be wildly shifting south. Competition has been stiff for satellite radio these days, as the alternatives continue to pop up in droves, but SIRI's solid portfolio of unique and exclusive content continue to attract new subscribers and register revenue growth.
Sirius XM is always one of the most heavily-traded companies out there and - with a retail following that is second to none - is also one of the most heavily-watched. If shares dip too much further below the two dollar mark, it's likely that SIRI's strong following could step in with heavy buying, as many investors out there still consider the current prices to be a relative bargain when considering the company's growing potential. Judging by some of the most recent analyst estimates, they may be correct.
The key short term focus surrounding this company revolves around the renewed talk of a full Liberty Media takeover. As it stands now, Liberty has a contract in hand to up its stake in SIRI to 45.2% with an effective purchase of over three hundred million shares for a price of $2.15/per share. This move materialized shortly after the U.S. Federal Communications Commission dismissed Liberty Media's application to take control of Sirius' operating licenses, an action which Liberty initially appealed.
Through additional stock purchases, Liberty could have an even higher stake in the company by the third quarter of this year and is making a serious push to achieve majority control of over 51%. Given the relatively swift decline in the SIRI share price, speculation will run rampant that Liberty may be out to pick up some cheaper shares.
At the depths of the recession a few years ago, Liberty Media swooped in and saved Sirius XM from the brink of bankruptcy. Once that agreement was consummated, it looked as if the two entities were a match made in heaven. But like Human Genome Sciences (HGSI) and GlaxoSmithKline (GSK) have also recently demonstrated, in the world of big business, marriages can quickly go sour. The Liberty enigma provides a nice plot twist, but the more relevant item for investors to consider is whether a SIRI rebound can materialize in the current market that has the majority of headlines boasting a bearing tone. However, as SIRI once proved when trading for under a dime, sometimes the best time to buy is when it looks like everyone else is selling. Keep SIRI on the radar this week.
Research In Motion (RIMM): The layoffs have come and the cutbacks have been made - but Research In Motion is far from becoming that feel-good recovery story that many would like to see. The Blackberry name has become mostly an afterthought since Apple's iPhone stormed the scene and Google following with Android, at least in most markets outside of the Middle East and parts of Europe.
But is the company done? With a ten dollar share price that is just a fraction of its former self, the pundits believe that it is. The only value left, they say, is the company's full portfolio of patents and the BlackBerry network itself. Everyone has a Hail Mary, though, and for RIM it's BlackBerry BBM 10. Initially the company planned on licensing the operating system to competitors, but recent indications are that the company will do no such thing, at least not yet, and instead continue to directly compete with the likes of Apple and Google -- a move not viewed as a smart one by the analysts.
Those looking for an all out rebound in the RIMM share price may want to continue to hold off. BBM 10 may prove to be a worthy Hail Mary, but it may also be considered an even riskier Hail Mary to jump into RIMM right now when there are other potentially more worthy deals out there right now following the market decline and continued volatility. It's likely that this one has continued room to drop, especially if the market does decline based on the election outcomes and credit concerns in Europe.
Ampio Pharmaceuticals (AMPE): Trading with volatility alongside the broad markets, Ampio Pharmaceuticals has registered some nice gains since the lows of mid-May when AMPE hit the mid-$2.50 range. With numerous catalysts pending for this company's pipeline of repositioned products, AMPE has been positioned for a rebound since the market took a dive and could begin realizing its potential as these catalysts play out. The most significant catalysts relate to pending definitive trials that are set to get underway later this year with FDA guidelines in mind.
Since Ampio's pipeline is based on meeting new indications with already-approved products, the path to approval could be significantly quicker than if the company were developing entirely new drugs. The recent volatility experienced by AMPE shares and the potential for FDA trial catalysts to hit the wires later this year has this one as a stock to watch.
Cytosorbents Corp (CTSO): Barely a week ago, shares of Cytosorbents Corp were trading for just a dime-- a price that VFC's Stock House considered to be a nice buy. Shares closed last week just under the thirteen cent mark, a nice increase from that dime price, although a spike into the close could have padded the numbers just a tad. At least partially attributed to CTSO's rise last week could be the initiation of coverage by Zack's, who tagged the company with a rating of 'outperform'.
Although the company's latest earnings report sparked a round of selling to take the share price down to a dime again, the company is building a foundation for future growth with a methodical commercial roll-out of CytoSorb in Europe that is designed to build confidence in the medical community that there actually just may be an answer for the thus-far elusive effective treatment of conditions where high cytokines are present, such as severe sepsis.
Shareholders have had to exercise patience since the European medical regulators approved the product before a late-stage trial was even completed - a sign of conviction, if you ask me - but as the news Zack's report emphasizes, there may be enough growing momentum and potential to take the share price closer to fifty cents than ten as the believers come on board. Keep an eye on CTSO, last week's growing momentum could carry over.
FuelCell Energy (FCEL): Although signs emerged for FuelCell Energy from last week's earnings report that the company is benefiting from recent restructuring and the securing of new deals overseas, shares dropped back to the dollar mark on decreased revenue from the year-prior period - not an encouraging sign for the short term traders looking to play a catalyst. While the revenue may have been down, Chip Bottone, President and Chief Executive Officer of FuelCell outlined another angle during his opening statements of the quarterly call:
"Cost reduction efforts and streamlining certain aspects of our business over the past year allowed us to break even at the gross profit level this quarter despite lower revenue year-over-year the gross margin improvement of $2.3 million on adjusted basis. This enhances our confidence in gaining profitability."
Given the encouraging aspects of the most recently-completed quarter and the international growth that is still being realized, FCEL may again prove to be a bargain while trading in the dollar range. Following the earnings report, Ardour Capital reiterated its rating of 'Buy' on FCEL shares, although lowered its price target to $1.75 - still a hefty increase over current prices. This is one to keep an eye on with an eye towards the future of green(er) energy production. When the impatient bail out, it could be a ripe time for the more patient investor to roll in.
Pharmacyclics (PCYC): Pharmacyclics made some noise at ASCO this month and some positive analyst comments combined with news that the FDA awarded an orphan drug designation to the company's treatment for chronic lymphocyctic leukemia to launch shares towards the forty dollar mark. This company is sitting on a market cap of nearly three billion dollars with no Phase III trials yet underway, but the potential of its pipeline technology and the "blockbuster" tag being used by analysts to identify this company's products has boosted PCYC to new heights.
It's rare to find an essential "Phase II" company so solidly on the rise, but PCYC has proven to be a demonstrated winner thus far and the new investor interest has jumped on board in droves. To put this company's dramatic price run into perspective, only four years ago PCYC was trading for roughly a buck after another of this company's products failed in late-stage trials - now them are some nice gains for those who bought then and are still holding now. PCYC jumped eight percent on Friday, making this one a key stock to watch during the coming week.
Teletouch Communications (TLLE): Teletouch has been making headway as both a growth and rebound story over the past weeks, and that sentiment was reiterated on Thursday with the announcement of another solid distribution deal. Teletouch announced a multi-year national supply and distribution agreement with TCT Mobile Multinational, Limited, a subsidiary of the publicly traded consumer electronics manufacturer, TCL Communication. The deal allows Teletouch to sell and distributeTCT's ALCATEL ONE TOUCH branded mobile phones.
T. A. "Kip" Hyde, Jr., President and COO of Teletouch, also highlighted in the press release that "The completion of this initial agreement with a leading global cellular handset manufacturer is a key milestone in Teletouch's stated effort to transform our core business from primarily providing AT&T (T)–based cellular billing services on a limited regional basis to becoming a prominent national wholesale wireless equipment distribution company."
Trading volume for TLLE shares have been picking up along with the notable boost in news flow and Thursday's news was accompanied by volume of well more than double the daily norm. Shares also closed at forty nine cents after trading at around forty for most of the week. Volume remained above average on Friday, although shares dropped back to forty four cents. Last week's volatile action, however, should put some additional eyes on TLLE trading this week.
Also worth watching:
Agenus Ince (AGEN): Smooth push back towards six with a late-week rally.
Ventrus Biosciences (VTUS): Eleven percent Friday spike positions Ventrus as a company and a stock to watch this week.
Titan Pharmaceuticals (TTNP.OB): Market rallied, but Titan dropped another five percent on Friday. Think some Probuphine news is due?
Synergy Pharmaceuticals (SGYP): Company exercised remainder of over-allotment option last week in relation to a recent finance offering. Pending catalysts have the current prices still at potential bargain levels. Also worth taking a look at the company's warrants, SGYPW.
NovaBay Pharmaceuticals (NBY): NovaBay's mid-week move held up into Friday's close. With a potential ground-breaking technology, NBY shouldn't fall too far from the speculative radar.
Disclosure: Long IMSC, CPST, FCEL, NBY, SGYP, TTNP, CTSO, AMPE.