3 Tech Stocks That Crashed This Week

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For various reasons, these 3 tech stocks missed out on this week's modest market rally. Find out what went wrong in this slideshow.

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3 Tech Stocks That Crashed This Week

  1. 1. 3 Tech Stocks That Crashed This Week
  2. 2. These 3 stocks missed a minor tech rally Source: Wikimedia Commons.
  3. 3. From June 16 to June 20: • 67% of tech stocks with more than $300 million market caps advanced this week. • Oracle, China Mobile Gaming, and Castlight Health didn’t get the memo. • Their weekly declines ranged from quiet (Castlight lost 11.6% on no news at all) to outrageous (China Mobile Gaming plunged 24% on news of an alleged bribery scandal).
  4. 4. Castlight Health simply dropped a few percent, almost every day. No bad news – just bad mojo.
  5. 5. Bad mojo? Please explain! • This maker of healthcare management software hit the public market in March. The first trading day closed at nearly $40 per share. • That’s up from the $16 initial offering price, and the bubble-like gains didn’t last. • Castlight is losing money fast, and may soon need to raise more cash somehow. • The stock got some good juju from a surprisingly decent quarterly report in May, but that memory is fading fast. • And Castlight still lost $24 million on $8.4 million in sales – analysts were just bracing for even worse second-quarter results.
  6. 6. Here’s Castlight’s entire market history. Mr. Market is still trying to figure out how to value this cash-burning business. Expect more volatility until the riddle is solved.
  7. 7. Oracle owners had nothing to complain about – until the company reported fourth-quarter results.
  8. 8. What happened? • Oracle missed analyst targets on both the top and bottom lines. • Software license sales disappointed while cloud-based services soared. Still, these fast-growing cloud services remain just 4% of Oracle’s total sales. • “We plan to increase our focus on the Cloud,” said Oracle CEO Larry Ellison. • The next day, Oracle shares traded as much as 3.9% lower, erasing nearly $6 billion of Oracle’s market cap.
  9. 9. The Oracle takeaway: • Oracle is heading in the right direction by adopting cloud-based software models along with renewable license and service contracts for cloud-based tools. • But for a company as large as Oracle, moving the needle quickly is no easy feat. • The company should struggle to satisfy Wall Street targets and its own short-term performance goals for the next several quarters. • Fellow Fool Steve Symington sees a buying opportunity in this temporary weakness.
  10. 10. China-based mobile gaming specialist vendor China Mobile Gaming lost 24% this week.
  11. 11. Ouch! What’s wrong? • Share prices plunged 25% on Thursday. Trading was halted for parts of the Friday session as the NASDAQ asked management for more information. • The China Mobile Gaming reportedly used bribery as a sales tactic. Thursday’s drop came as the company fired nine people in its publishing division, seemingly confirming the scandalous allegation. • The firings included division president Shuling Ying, who was celebrated for igniting rapid sales growth.
  12. 12. Investors are nervous – for good reason • Today, China Mobile Gaming trades at just $14.33 per share. • That’s a 65% drop from all-time highs of $40.31, set in February. • The small-cap can’t afford a cloud of scandal obscuring its business operations, and deserves kudos for taking drastic action to remedy the bribery charges. • The stock is lightly followed by analysts, and quick sales growth isn’t translating into cash profits.
  13. 13. What to do with China Mobile Gaming now • When you can’t trust a company’s management, you can’t invest in the stock either. • Even if China Mobile Gaming is ultimately exonerated from these bribery accusations, the circle of trust has already been broken. • Gamblers only, please. This saga is best watched from the sidelines.
  14. 14. The next Next Big Thing is coming! Are you ready?

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