Aug 27, 2010 10:04 AM PDT
Birds of a Feather
RIGL: Upgraded to 'Outperform' After Early Nov Q3 Loss of $0.70 EPS
CCOI: Upgraded to 'Outperform' After Early Nov Q3 Loss of $0.07 EPS
And
CHINA: Posts Positive Q3 EPS of $0.33 on 20% Revenue Decrease
Gaining 5.66% this morning is Rigel Pharmaceuticals (RIGL) http://www.rigel.com/ currently trading in the $8.22 range. RIGL is a very heavily traded SmallCap. RIGL is an interesting story. On July 21, 2009 RIGL sets a 52-week high of $14.75 then a mid-stage drug trial stalls and the stock falls. Then at $7 in early November, its pre-Q3 earnings and subsequent Q3 EPS loss of 70 cents drives the stock to $6. RIGL then makes a remarkable turnaround and begins a steady climb back towards $8.
RIGL has 51.82 million shares out and 66% are owned by institutions. I believe this is where the RIGL price support is coming from. Institutions tend to aggregate to disperse risk. Because RIGL has a little over 10% of its float (49.86 million) owned by short-sellers, this is a 'Watch Closely' stock for me.
Here's why... the story: RIGL is going to re-try its drug trial in the first half of 2010 and those institutional holders are not only concerned with risk, but with success. They must believe the RIGL arthritis pill R788 will pass muster with commercialization on the horizon. And as they continue their support and 'good news' starts coming out of the trials, those short-sellers are going to have to 'buy-in' to cover any loss and added buyers always pushes a stock up in value.
Research house RBC Capital Markets gave RIGL an upgrade today from 'Sector Perform' to 'Outperform' and there is a reason why the RBC analyst(s) thinks RIGL will do better than the rest. In the near-term (3 Mo), if RIGL can: make some headway with the drug, keep its institutional support and bring in those short-sellers, the stock will continue to climb towards its 52-week high and set a new floor in the process. Timing is often, everything, and watching RIGL closely could provide an investor the insight as to which threshold to buy on.
It's interesting to note that on November 3, RIGL management said they foresaw a deal before the late-stage study begins in 2010. News of a deal will also push the stock up. Partners on various RIGL programs include: Serono SA, Pfizer Inc. and Merck & Co. RIGL management also said on Nov 3 they would meet with European health regulators to discuss approval requirements. RIGL ended Q3 09 with cash, cash equivalents and available-for-sale securities of $156.1 million. RIGL also has two major drug candidates in Phase I trials.
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RIGL 3-Month RIGL 1-Month
Gaining 5.75% this morning is Cogent Communications Group Inc., (CCOI) http://www.cogentco.com/ currently trading in the $8.68 range. CCOI has a 3-Month average daily trading volume of 393,776 shares. CCOI easily doubled that early in todays session. On trailing twelve month revenues of $228 million, CCOI had a positive diluted EPS of $0.82 (during the 'great recession') and recently set a 52-week high of $12.78 on October 12.
The 3-Month floor on CCOI is $8. CCOI was riding high at the $12 when pre-Q3 earnings news and the subsequent Q3 report on November 9 drove the stock back to the $8 range. This is also a 'Watch Closely' stock for me. I believe CCOI will push forward to its $12 past in the near-term, and that there is money to be made here, but I'm not sure of the entry point for a new investor. I would revisit a 'buy' idea around the $10 range.
CCOI got an upgrade today from Wells Fargo from 'Market Perform' to 'Outperform' and that surely strengthened interest this morning. The Q3 7 cent EPS loss reported November 9 was after all only a cent away from estimates and Q3 service revenues were up 10.3%. But, I'm going with Wells Fargo analyst Jennifer Fritzsche who noted during early November that CCOI's management guidance 'looks to be difficult to achieve this year in terms of top-line growth of 10 to 20 percent'.
CCOI did post a Q3 increase of 23.8% in customer connections to its internet access service (primarily aimed at businesses) to 20,988, but that was lower sequentially than its Q2 increase of 26%. Adding some new client sales to its revenue base and increasing market share would go a long way in supporting the stock at the $10 level.
CCOI 3-Month CHINA 3-Month
Gaining 10.33% this morning is CDC Corporation (CHINA) http://www.cdccorporation.net/ currently trading in the $2.67 range. CHINA has a 3-Month average daily trading volume of 1,049,470 shares and it topped that 3 hours into this mornings session. There's big interest in CHINA at this price. CHINA has a 52-week high of $3.92 set on 07-27-09. The chart indicates a 3-Month floor at $2.20 with support at $2.40 and spikes into the $2.60-80 range. CHINA is still more than 25% off its 52-week high, and considering todays mixed Q3 earnings report, this is also a 'Watch Closely' stock for me.
CHINA, software developer whose shares just started trading this summer in the U.S. said its Q3 profit rose 47% on lower costs and expenses: $6.2 million or 22 cents per share compared with a profit of $4.2 million, or 15 cents per share a year prior. Excluding charges, the company said it earned 33 cents per share. But bottom-line cost cutting isn't always indicative of success in and of itself and CHINA reported that top-line Q3 revenues fell 20% to $48.6 million from $60.5 million
GUIDANCE
Management at CHINA said its profit guidance for 2009 is revised upward and it expects net income attributable to controlling interest to be in the range of $17.2 - $19.3 million and Adjusted EBITDA to be in the range of $50.2 to $51.5 million. This represents an increase of 11% and 4% respectively from guidance previously given in Q2 2009.
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