Will Ping Identity (PING) Bounce Back?

It wasn’t that long ago that just about any stock losing around thirty percent in a single day would have been headline news, but in this GameStop (GME), Reddit-driven world, such a move can go barely noticed. Still, when it happens to something outside the Reddit universe, it is always significant and is usually an opportunity one way or another. That is what happened to Ping Identity (PING) yesterday after earnings. PING lost well over a quarter of its value in one day, after issuing weaker than expected guidance with their Q4 earnings.

Outside of a stampede by an ambitious crowd of social media users, it usually takes a confluence of events, a perfect storm of news and circumstances, for a stock to move that much in a day, and that was definitely the case here. Obviously, the weak guidance was the trigger, but the reaction wouldn’t have been nearly so bad were it not for other contributing factors.

First of all, the earnings release came on a day when stocks in general were getting hammered, with tech leading the way down. In that environment, even fairly good results could have seen the stock trade lower, so any weakness was exaggerated. In different circumstances, the fact that Q4 results showed beats on both the top and bottom lines would have tempered the reaction to the other news, and it isn’t too much of a stretch to imagine PING barely moving on a “mixed” earnings release. Weaker-than-expected guidance is less worrying when previous estimates are shown to be on the low side by a beat in the preceding quarter.

Then there was the build-up to the release in PING itself. The stock had been heading lower for a while, having hit a high just over $37 two weeks ago, but that downward move was interrupted by some buying the day before earnings. That indicates that some fast money was betting on good results, and the rush to exit those speculative, inherently short-term positions would have accelerated the move. The irony is that those traders got what they were anticipating. PING did release good Q4 earnings, but the guidance and the announcement that their head of sales was leaving without a clear succession plan proved far more powerful than the beats.

Still, the most important question for traders and investors is, as always, not what happened yesterday, but what will happen tomorrow, and for a few more tomorrows after that. Both the nature of the move and the history of the stock indicates that the answers to those questions will be that PING will bounce back before long.

The 6-month chart above shows that PING experienced a similar drop in October that started at about the same level and turned around at about $20. When sentiment towards tech stocks overall changes, which it will before too long, a similar bounce is on the cards. And when that happens, if history repeats, the abovementioned guidance will be forgotten.

It is always dangerous to attempt to "catch a falling knife" in trading, so it might make sense to wait until we see what happens today before buying something that has been hit this hard. But logic and the chart both suggest that a bounce will come before too long. Right now, the proximity to that $20 support level and the fact that pre-market trading, as of this writing, is indicating a slightly higher opening for PING this morning, makes me believe that if you wait here, you could easily miss out. I would favor buying here with a stop just below $20. It is a risky trade of course, but one with a good upside, so it looks like a risk worth taking.