These 5 stocks exploded last week: should you buy?
TThere could be a number of reasons for soaring a company’s stock price.
Sometimes it’s nothing more than market players adjusting positions. As day traders see prices rise, they move into the stock, adding a little extra momentum. But this type of price movement may not last long enough to generate substantial gains and their trading could be risky.
Stocks also respond positively to positive news.
So, for example, the company may have agreed to acquire another at a favorable price, or to bring in key assets, or for a competitive advantage, etc. Conversely, the company can agree to be taken over at an attractive price. In this case, investors are likely to push the price up to a level close to the agreed price, as this gives them a safe and quick opportunity to lock in some gains.
New product announcements, while they are likely to make a significant difference to the company’s bottom line in the short to medium term, can also lead to an increase in stocks. Like NVIDIA’s product launch event which has positioned the company as the clear leader in emerging end markets including AV, ML, etc.
An industry-wide phenomenon such as a shortage of components can also be a positive development for the companies that market them. For example, the shortage of timber makes some traders wealthy by fetching high prices from high-demand customers.
So there could be many reasons why stock prices suddenly exploded. But for long-term investors, not all news is actionable. Which means it’s probably not a good idea to take an action just because other people are doing it.
You’d better consider your personal goals for investing in cash and how it will be used. The market will do what it wants, and most of the time there will be opportunities to make gains, if you are patient. So if you are investing for the long term, small moves up or down shouldn’t sit you down. You want to get used to seeing the long term trend. And the longer term trend is positive for stocks going somewhere.
One of the things you might do when you see a sudden increase in price is to check its rationality. If it makes sense based on the facts, you can act on it. So, for example, if management says its latest acquisition will help the company reduce losses and / or immediately increase results, that would be a good reason for a stock price appreciation.
In fact, it has been seen historically that an almost invariable upward revision of earnings estimates leads to increases in stock prices, either immediately or over a period of time. Therefore, it makes sense to check whether the price increase is the result of revisions to the estimates. And if they are, this could be a good investment opportunity.
Let’s see some examples-
ACM Research, Inc. ACMR
The Fremont, California-based company develops, manufactures, and sells single-wafer wet cleaning equipment, which semiconductor manufacturers can use in many manufacturing steps to remove particles, contaminants, and other random defects.
We already know that there is a shortage of chips right now and chipmakers can’t get things out fast enough. So there is a good driver for this industry-wide business.
Now we see that the current year estimate just jumped 10 cents 7 days ago. Being an increase of 7.5%, it can be considered substantial. The 2022 estimate has also increased. Thus, analysts cook in a positive trend in the estimate. In addition, they expect a large double-digit percentage increase in revenue and profits this year and next.
So if shares of Zacks # 2 (Buy) ranked company jumped 14.8% over the past week, there seems to be a good reason for that.
And to determine if there are more advantages in the cards (which makes investing in stocks worthwhile), we could take a look at the current price as a percentage of its 52-week range. If it’s not too high (in this case it’s only 24.4%), there’s a good chance that a further rise is possible.
Ingredients Alto, Inc. ALTO
The Sacramento, California-based company is a producer of specialty alcohol and essential ingredients used in health, home, and beauty products; food and drinks; essential ingredients and renewable fuels.
Here too, there is an important industry-wide factor that can serve as wind under its wings. The company sells industrial alcohol which, as we know, is in high demand for use in disinfectants. This demand is unlikely to decline in the short term, as coronavirus fears keep cropping up from time to time, and new strains leading to new waves of infection cannot be ruled out. Regardless, the pandemic has also altered habits to some extent, a trend that favors the use of more hand sanitizers in the future.
So we should probably get used to the price increases of this stock, as it either repays its debt and other obligations, or sees continued strong demand. This Zacks Rank # 2 company has seen its share price rise 10.8% over the past week.
And, unsurprisingly, Zacks’ consensus estimate for its 2021 earnings fell from 5 cents to 44 cents 7 days ago. The 2022 estimate has dropped from 82 cents to 93 cents.
The only analyst covering the stock currently expects revenue to rise 5.1% this year and 4.2% next. But revenues are another story: increasing 450.0% this year and 111.4% next.
Additionally, its current price is 59.8% of its 52 week range, so we can safely say that there is still room for further hike.
Cerence Inc. CRNC
Cerence, based in Burlington, MA, provides AI-powered assistants and innovations for connected and autonomous vehicles.
Although currently a relatively small player, the company operates in an attractive emerging industry which is set to grow by leaps and bounds over the next few years.
Zacks Rank # 1 (Strong Buy) stock has seen an 11.6% share price increase over the past week and, encouragingly, has been following a noticeable revision in estimates. .
For the current year, Zacks’ consensus estimate rose 13.6% 7 days ago. For the following year, the estimate increased by 8.2%. Analysts are currently forecasting revenue and profit growth of 18.0% and 39.3%, respectively this year (end of September). They expect increases of 9.8% and 12.4% next year.
The current price is 63.8% of its 52 week range, so a further hike is possible.
GrowGeneration Corp. GRWG
Based in Pueblo, CO, GrowGeneration owns and operates specialty hydroponic and organic gardening stores. Its product line includes nutrients and organic soils, advanced lighting technology, and cutting edge hydroponic equipment for indoor and outdoor use by commercial and hobby growers. It operates primarily in Colorado, California, Las Vegas, Rhode Island and Washington.
It is essentially a pandemic game, but also a game on the home operating model that is not going away completely as we can see now.
After the increase of 3 cents for the current year and 6 cents for the following year 7 days ago, analysts are currently looking for a profit increase of 363.6% in 2021 and an increase of 36.0 % in 2022. Revenue is expected to increase by 139.0% and 29.9%, respectively in 2021 and 2022.
Zacks Rank # 2 shares jumped 19.0% last week, but with it at 65.5% of its 52-week range, a further rise seems possible.
SiTime Corporation SITM
SiTime Corporation, based in Santa Clara, California, offers MEMS silicon timing system solutions through its wholly owned subsidiary called MegaChips Corporation.
The company is experiencing very strong ordering dynamics leading to increased visibility (more than half of reservations in the first quarter concerned deliveries in five to twelve months). The strength is at least in part attributable to fear of scarcity, as the need for timing solutions with greater precision, smaller size, and higher resilience skyrockets, and enterprise solutions are finding their way. way in a growing number of connected devices that we see everywhere. we. There are several favorable winds for strong and continued growth over the next few years.
Zacks’ consensus estimate for SiTime’s earnings in 2021 jumped 22.8% 7 days ago, while that of 2022 jumped 6.9%. Analysts currently expect revenue and profit growth of 44.1% and 145.7% respectively in 2021. For 2022, they expect revenue and profits to grow by 17.8% respectively. and 37.2%.
Shares of this company Zacks Rank # 2 have risen 11.3% over the past week. But as they remain at 57.8% of their 52-week range, another hike is a sure possibility.
Price movement over one month
Image source: Zacks Investment Research
Zacks’ top picks for leveraging artificial intelligence
By 2021, this breakthrough technology is expected to generate $ 327.5 billion in revenue. Today, Shark Tank star and billionaire investor Mark Cuban says AI will “” create the world’s first trillionaires. “” Zacks’ urgent special report reveals 3 AI choices investors need to know today.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.