Markets

Why Globalstar Stock Zoomed 25% Today

What happened

Shares of small-cap satellite communications company Globalstar (NYSEMKT: GSAT) closed 24.8% higher on Wednesday on no discernible news -- and that's not really surprising.

Fact is, Globalstar's stock price tends to hop around quite a lot, up one day, down the next, whether or not there's an obvious reason for moves.

Cartoon character riding a scooter up a rising arrow

Image source: Getty Images.

So what

Despite its respectable market capitalization of $700 million and change, Globalstar is what we call a "penny stock," with a price well below $1 a share. As such, changes of just a few pennies in its price can drive huge percentage gains and losses in the stock.

This fact makes the stock ripe for manipulation by momentum investors, and also attracts more momentum investors to it when they sense that the stock has begun moving one way or the other. Even a 25% change in share price such as the one we saw today, therefore, doesn't necessarily indicate that there's anything real happening that could justify the move.

So what

Of course, it doesn't mean there is no explanation, either. For example, both Tuesday and Wednesday, shares of Maxar Technologies made big moves in response to a new buy rating from JPMorgan. Given that both Maxar and Globalstar operate in the field of space exploration and business, and that both stocks carry hefty debt loads (albeit Maxar's is much heavier than Globalstar's), it is possible investors were thinking, "If Maxar can win an upgrade, maybe Globalstar can too."

So, perhaps some are positioning themselves to benefit if some analyst comes along and does upgrade Globalstar stock. I suppose that could happen. Unlike those momentum investors, though, I think I'll wait until I see a compelling case for Globalstar before buying it hand over fist.

Patience is a virtue, and the early bird sometimes gets stuck with a worm.

10 stocks we like better than Globalstar
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Globalstar wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

 

*Stock Advisor returns as of June 1, 2019

 

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

GSAT

Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More