These 3 stocks missed a minor tech rally
Source: Wikimedia Commons.
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).
Castlight Health simply
dropped a few percent,
almost every day.
No bad news –
just bad mojo.
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
• Castlight is losing money fast, and may soon need to raise more cash
• 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.
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.
Oracle owners had nothing to
complain about – until the company
reported fourth-quarter results.
• Oracle missed analyst targets on both the top and
• 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.
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.
vendor China Mobile
Gaming lost 24% this
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
• The firings included division president Shuling Ying,
who was celebrated for igniting rapid sales growth.
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
• The stock is lightly followed by analysts, and quick sales growth isn’t
translating into cash profits.
What to do with China Mobile Gaming now
• When you can’t trust a company’s
management, you can’t invest in the stock
• 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.
Next Big Thing
Are you ready?