2 Buys From a Trio of Tech Stocks Poised to Move
Chris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Companies exhibiting massive trading volumes are a starting point for investors looking for big stock price swings in the near-term. In the last week of Feb. 2012, tech companies representing a wide-array of sub-industries experienced higher-than-average trading volume. Investors should expect these companies to move widely in the trading sessions ahead.
Zynga (NASDAQ: ZNGA)
Temporary short-covering that began at the beginning of February helped push shares up over 9% in a single day. Bearishness is still high: short-interest increased from 13.15 million shares on Jan. 31 to 25.94 million shares on Feb. 15. Zynga reported quarterly earnings that exceeded bearish analyst expectations. Zynga reported a 24% increase in monthly active users in its fourth quarter. Though daily bookings per user declined 17% to $0.051, Zynga cut costs to reflect its shrinking business in the last quarter. Zynga reduced research expenses by 70% to around $132 million. Operating expenditures declined to $273.6 million, a drop of 66%.
Zynga ended its last quarter with $1.65 billion in cash and cash equivalents. With 784.21 million shares outstanding, Zynga has $2.10 in cash per share. Zynga traded recently at around $3.43, which means investors are paying just $1.33 above the liquidation value of the company.
Zynga could move higher. The company has a number of top titles on Facebook, including Farmville 2. Plans for real-money gambling are progressing, and although it would be start out as a small part of Zynga’s business, it will likely grow steadily.
Universal Display (NASDAQ: OLED)
Universal Display shares rose 11.4% after the company reported quarterly results. The company sells materials used for OLED. When Samsung Galaxy S IV is announced on Mar. 14, this OLED maker will benefit. More importantly, the use of OLED in televisions remains pivotal in the company’s growth. More material is needed for the larger display, which in turn would justify a higher valuation for Universal Display. TV makers like LG Electronics and Sony are ramping up research and development spending to bring OLED televisions to market by 2014.
In Universal Display’s last quarter, the company provided revenue guidance of $110 million to $125 million for 2013. This is below the $122.5 million consensus. Sales for materials declined 7% from the previous year, but gross margins were 93%. The company increased R&D spend by 34% to $8 million.
3D Systems (NYSE: DDD)
3D Systems sold-off by around 10% after reporting its gross margin declining 10 basis points to 51.7%. The company continued to grow its backlog by 23% from the previous quarter. The backlog now stands at $11.4 million. R&D increased 70% compared to last year, and represents 8% of revenue.
Investors should expect 3D-printing companies to continue to highly volatile. The recent drop benefited many bearish investors, as put option volumes increased over the last 45 days. With revenue of $101.6 million missing consensus by $2.26 million, the recent decline in shares could give an entry point for investors who missed the run-up.
Chart Source: Yahoo Finance
Zynga, Universal Display, and 3D Systems are all poised to continue to trade with high volatility in the short-term. Upside, at first, appears likely for these companies, but Zynga and Universal Display look like the better choices at this time. There is no doubt that 3D printing will continue to grow, but there are no near-term catalysts that support a higher share price. Conversely, Zynga’s disciplined cost-cutting and focus in entering real-money gambling are good for enhancing shareholder value. Universal Display will interest investors who believe the revolution in OLED television will begin in 2014. In the short-term, announcements from mobile makers using OLED displays will help nudge Universal Display shares upwards.
chrispycrunch has no position in any stocks mentioned. The Motley Fool recommends 3D Systems and Universal Display . The Motley Fool owns shares of 3D Systems and Universal Display and has the following options: Short Jan 2014 $36 Calls on 3D Systems and Short Jan 2014 $20 Puts on 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!