Among the biggest losers in Monday's early trading are Cellcom Israel (NYSE: CEL), Sinovac (NYSE: SVA) and Microvision (Nasdaq: MVIS).| Top Percentage Losers --Monday, June 28, 2010 | ||||
| Company Name (Ticker) | Intra-Day Price | Intra-Day % Loss | 52-Week High | 52-Week Low |
| Sinovac (NYSE: SVA) | $4.53 | -9.1% | $12.50 | $3.60 |
| Microvision (Nasdaq: MVIS) | $3.28 | -8.9% | $5.75 | $1.92 |
| Cellcom Israel (NYSE: CEL) | $26.40 | -2.9% | $36.41 | $25.00 |
*Table includes companies with minimum market capitalizations of $200 million and three month trading volumes of at least 100,000 shares. All percentage returns are listed as of 11:00AM Eastern Standard Time. Click on ticker symbols for up-to-the-minute price quotes and percentage gain data. | ||||
For Cellcom, the Bad News Keeps on Coming
It’s been a forgettable year for Israeli wireless communications firm Israel Cellcom (Nasdaq: CEL). Earlier in the year, analysts downgraded the stock, citing concerns that new firms would enter the race and steal market share . The market for Israeli voice and data services is nearly mature, so the key players must fight to woo over defecting customers from rivals. Up until this year, this market had been characterized by high prices and low competition. Orange, Pelephone and Cellcom had the market all to themselves. By the end of this year, there could be another true competitor, and several others that piggyback on existing networks - known as Mobile Virtual Network Operators (MVNO).
Adding insult, Cellcom is poised to start accepting lower rates for the fees its garners for letting smaller telecom operators connect to its network, known as inter-connection fees. Those fees typically account for roughly 20% of Cellcom’s sales. Lower fees make the MVNO business model more viable. The fees are expected to drop by as much as 84% during the next six months, and the MVNOs may launch on the market by 2012.
Action to Take --> It’s the worst of both worlds. Reduced fee income and more competition will likely yield a very competitive market, sending Cellcom’s earnings streams into terminal decline. Shares of Cellcom Israel, which are down another -3% today, have been in steady freefall, pushing the dividend yeld up into double-digits. Dividend yields that high are sometimes unsustainable, and the market is signaling that the dividend will need to be reduced. Until that happens, and shares can find a new appropriate relative value, they should be avoided.
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A Slow Year for Viruses
Many of the major viral outbreaks of the last decade such as SARS and H1N1 have had their genesis in Asia, most notably in China and Hong Kong. And whenever viral activity is spiking, shares of Sinovac (NYSE: SVA) are always in hot demand. The Chinese government occasionally doles out large orders for vaccines, putting the company in the spotlight. That happened last September, pushing shares up to $10. They eventually drifted down toward the $4 mark, as concerns about H1N1 and other viruses moved off the radar.
Just this past Friday, shares rose quickly anew on a reiterated "Buy" rating. Analysts at Piper Jaffray noted that the Chinese government recently invited Sinovac to participate in that country’s national immunization program. But as we start the new week, investors are already taking profits on that call, pushing shares down more than -9% in Monday trading.
Action to Take --> This can be quite an interesting speculative play. When a global virus emerges, it often first appears in Asia in late summer, and then spreads as winter sets in. So this may be the time of year to buy shares. This isn’t completely speculative, as shares will find some support as the company routinely earns $0.30 to $0.40 a share. That places a $3.50 floor on shares, but any new pandemic concerns would likely cause shares to double from the current $4.50.
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Microvision not in Play--Yet
There was some unusual trading activity in Microvision (Nasdaq: MVIS) in the final minutes of Friday’s trading session. Its shares rose more than +10% in the hour before traders went home for the weekend. That kind of action usually anticipates that great news will be arriving before the market opens on Monday. The fact that shares are down -9% in Monday trading tells you that “no news is bad news.”
Microvision has been bandied about in the past as a buyout candidate. The company has developed a very strong technology base involving miniaturized imaging systems that can be used in a range of photography and projection devices. But turning that base of intellectual property (IP) into a moneymaker has been a challenge, as the company generates minimal revenues. In theory, a larger company could incorporate Microvision’s technology into their products to gain a competitive edge.Action to Take --> Shares should never be bought strictly on the basis of a potential buyout. Though these rumors may ultimately prove true, they have proven false many times before. Caveat Emptor.
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