I know merely posing the possibility will raise some eyebrows, but I'm warming up to OCZ Technology Group Inc. (NASDAQ:OCZ). Yes, this the same OCZ Technology Group that had a miserable time in 2012, with shares falling from a peak of above $10.00 early last year to a low of $1.11 by November, reflecting a combination of problems (including a saturated market and an inability to secure the materials needed to make solid state drives). But, I've got a feeling the worst is behind the company, and that there's more upside potential from OCZ than downside for the foreseeable future.
It doesn't appear I'm the only one going bargain shopping either. After making a hard landing following the April plunge, OCZ has doled out a slow and steady uptrend, quietly crossing above the 20-day moving average line (blue) and then the 50-day moving average line (purple). In fact, OCZ Technology Group shares are now using the 20-day line as a pushoff point.
The next hurdle could be a tough one. In fact, it already has been a tough one. It's the 100-day moving average line (gray), currently at $1.60 - all it took was a brush with the 100-day average in late-May to kill the budding rally effort from OCZ Technology Group at the time. But, the buyers never really went away. They just needed to regroup. Now they have, and are getting ready to test the 100-day line for the second time in three days. If they can carry OCZ shares past that line in the sand (and it's looking like they have the needed momentum to do so), look out above.
Of course, the question is, does OCZ Technology Group Inc. have anything in the news pipeline that will keep investors interested in buying? The answer is, yes.
For starters, the company has debuted the Vertex 450 solid state drive... hardware that performs as well as anything else out there (and better than most comparable drives). The Vertex 450 provides bandwidth of up to 540MB/s read, 530MB/s write, and 4K random write performance of up to 90,000 IOPS, which - in a word - rocks.
The company is also taking care of business on the corporate front. In May the NASDAQ gave OCZ a break with its listing woes, and in early June the company finally settled a shareholder suit regarding a (stock) derivative snafu. OCZ Technology Group Inc. also managed to raise the $10 million it needed to stave off a loan default, which would have rekindled several of the company's chief headaches. Most say that loan from Hercules is toxic. What the critics don't seem to appreciate is that the loan terms were pretty favorable, unlike most loans granted to struggling small companies. Now the company can focus on the business of, you know, making and selling solid state drives.
Just to be fair, the company's not out of the woods yet. If it was a rock-solid play right now, the stock would be much higher. It's that risk, however, that creates the opportunity. Right now, OCZ is in that sweet spot between a light at the end of the tunnel and the point where most traders start to believe in the company again. That's right where I want to get in.
The bottom line is, OCZ Technology is making the shift from consumer to enterprise, which will take time, but will be well worth the wait. The company has said all along it doesn't need a loan of more than $10 million, which is all that it took. The loan terms for that amount give the company the flexibility it needs, but don't give Hercules an opportunity to squeeze the company into submission.
The next milestone - perhaps 'the' milestone - is filing any and all of its quarterly filings that haven't been submitted (well, re-filed) since around this time last year. The market expects the worse... declining sales and profits. But, I've got a feeling OCZ Technology Group Inc. is going to report numbers that are better than expected. Just doing that could light a fire under the stock that's currently priced at well under a worst-case scenario. The due date for all that data is September 16th. That's the day I become a hero or a goat. I'm planning on being a hero.
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