Among the biggest losers in Monday's early trading are
Cellcom Israel (NYSE:
CEL
)
,
Sinovac (NYSE:
SVA
)
and
Microvision (Nasdaq:
MVIS
)
.
|
Top Percentage Losers --Monday, June 28,
2010
|
|
Company Name (Ticker)
|
Intra-Day Price
|
Intra-Day
% Loss
|
52-Week High
|
52-Week Low
|
| Sinovac (NYSE:
SVA
) |
$4.53 |
-9.1
%
|
$12.50 |
$3.60 |
Microvision
(Nasdaq:
MVIS
) |
$3.28 |
-
8.9%
|
$5.75 |
$1.92 |
| Cellcom Israel (NYSE:
CEL
) |
$26.40 |
-
2.9%
|
$36.41 |
$25.00 |
|
*Table includes companies with minimum market
capitalizations of $200 million and three month trading
volumes of at least 100,000 shares. All percentage returns
are listed as of 11:00AM Eastern Standard Time . Click on
ticker symbols for up-to-the-minute price quotes and
percentage gain data.
|
For Cellcom, the Bad News Keeps on Coming
It's been a forgettable year for Israeli wireless communications
firm
Israel Cellcom (Nasdaq:
CEL
)
. Earlier in the year, analysts downgraded the stock, citing
concerns that new firms would enter the race and steal
market share
. The market for Israeli voice and data services is nearly mature,
so the key players must fight to woo over defecting customers from
rivals. Up until this year, this market had been characterized by
high prices and low competition. Orange, Pelephone and Cellcom had
the market all to themselves. By the end of this year, there could
be another true competitor, and several others that piggyback on
existing networks - known as Mobile Virtual Network Operators (
MVNO
).
Adding insult, Cellcom is poised to start accepting lower rates for
the fees its garners for letting smaller telecom operators connect
to its network, known as inter-connection fees. Those fees
typically account for roughly 20% of Cellcom's sales. Lower fees
make the MVNO
business model
more viable. The fees are expected to drop by as much as 84% during
the next six months, and the MVNOs may launch on the market by
2012.
Action to Take -->
It's the worst of both worlds. Reduced fee income and more
competition will likely yield a very competitive market, sending
Cellcom's earnings streams into terminal decline. Shares of Cellcom
Israel, which are down another -3% today, have been in steady
freefall, pushing the
dividend yield
up into double-digits. Dividend yields that high are sometimes
unsustainable, and the market is signaling that the
dividend
will need to be reduced. Until that happens, and shares can find a
new appropriate relative value, they should be avoided.
------------------------------------
A Slow Year for Viruses
Many of the major viral outbreaks of the last decade such as SARS
and H1N1 have had their genesis in Asia, most notably in China and
Hong Kong. And whenever viral activity is spiking, shares of
Sinovac (NYSE:
SVA
)
are always in hot demand. The Chinese government occasionally doles
out large orders for vaccines, putting the company in the
spotlight. That happened last September, pushing shares up to $10.
They eventually drifted down toward the $4 mark, as concerns about
H1N1 and other viruses moved off the radar.
Just this past Friday, shares rose quickly anew on a reiterated
"Buy" rating. Analysts at Piper Jaffray noted that the Chinese
government recently invited Sinovac to participate in that
country's national immunization program. But as we start the new
week, investors are already taking profits on that call, pushing
shares down more than -9% in Monday trading.
Action to Take -->
This can be quite an interesting speculative play. When a global
virus emerges, it often first appears in Asia in late summer, and
then spreads as winter sets in. So this may be the time of year to
buy shares. This isn't completely speculative, as shares will find
some support as the company routinely earns $0.30 to $0.40 a share.
That places a $3.50 floor on shares, but any new pandemic concerns
would likely cause shares to double from the current $4.50.
------------------------------------
Microvision not in Play--Yet
There was some unusual trading activity in
Microvision (Nasdaq:
MVIS
)
in the final minutes of Friday's trading session. Its shares rose
more than +10% in the hour before traders went home for the
weekend. That kind of action usually anticipates that great news
will be arriving before the market opens on Monday. The fact that
shares are down -9% in Monday trading tells you that "no news is
bad news."
Microvision has been bandied about in the past as a
buyout
candidate. The company has developed a very strong technology base
involving miniaturized imaging systems that can be used in a range
of photography and projection devices. But turning that base of
intellectual property (
IP
) into a moneymaker has been a challenge, as the company generates
minimal revenues. In theory, a larger company could incorporate
Microvision's technology into their products to gain a competitive
edge.
Action to Take -->
Shares should never be bought strictly on the basis of a potential
buyout. Though these rumors may ultimately prove true, they have
proven false many times before.
Caveat Emptor
.
-- David Sterman
Staff Writer
StreetAuthority
Disclosure: Neither StreetAuthority, LLC nor the David Sterman
hold positions in any securities mentioned in this report.
StreetAuthority