Sometimes, traders make things more complicated than they have to be. Sometimes, it's the simplest of clues that points to a budding breakout. Take Bazaarvoice Inc. (NASDAQ:BV) for instance. This inconspicuous small cap stock - anything but a household name - has quietly spent the last week and a half working its way into a new rally effort. In fact, BV has actually gotten over the hump, and may well be one of the best looking opportunities out there right now.
Bazaarvoice is a web-marketing service provider. Its SaaS platform allows marketers to tap into a variety of social commerce venues, like product review platforms. BV also offers an analytical tool of how a product's web-born word-of-mouth advertising is progressing.
It's been a very successful company too, posting four straight years of revenue growth. In 2008, Bazaarvoice Inc. generated less than $10 million in sales, but put $106 million on its top line last year. That's not bad for a young, $578 million company.
So why have BV shares been such a miserable performer since early 2012, when the company won its NASDAQ listing? The stock's fallen from a peak of $21.10 in April of last year to a low of $6.37 last month.
One explanation is the hype/reality cycle that's plagued so many companies of late. Traders were stoked about the potential upside of Bazaarvoice Inc. in late 2011 and early 2012, but as time wore on, it became clear that reaching that potential wouldn't be easy, nor would it happen overnight. The market punished the stock accordingly, whether ot was deserved or not.
Another explanation - and an extension of the punishment - is the initiation of a lawsuit against Bazaarvoice's directors. It was mostly grumbling and rumor earlier in the year, but became a reality this month when law firms started to post public notices of class action lawsuits. The complaint? The United States Department of Justice blocked an attempted acquisition of a competitor. The DoJ said the union would violate antitrust laws. The stock dropped as a result.
Does the lawsuit have merit? Who knows? Maybe the stock's dip to $6.54 would have happened anyway. Maybe the stock only reached a pre-acquisition price of $8.97 because of the looming acquisition. And therein lies the rub... the allegations as they stand right now don't actually point out any wrongdoing or malfeasance - just disappointment. Those suits usually don't make it to the end of the trial; some never even make it to the beginning of one.
Regardless, newcomers should be interested in BV simply because the stock is suddenly doing well again. Shares have made gains in five of the past six days (see chart below), snapping a losing streak and hurdling key moving average lines in the process. Given how oversold Bazaarvoice was by mid-January, there's a ton of ground to be made up here. And, the stock seems intent on making good on that promise now.