SANTA ANA, Calif. (TheStreet) -- STEC (STEC) appears to have had a phenomenal 2009, when its shares almost tripled and its revenue climbed an estimated 54%. In contrast, the Russell 2000, a small-cap index, gained 27% and revenues were down among tech companies, including IBM (IBM) and Hewlett-Packard (HPQ).
But everything was not rosy for Santa Ana, Calif.-based STEC.
The shares climbed almost ninefold to $41 by Sept. 10, before falling to $12 and losing more than $1.5 billion in market cap by December. The stock has rebounded, but investors are still scratching their heads and wondering what the heck is going on.
STEC, a maker of memory components for electronic storage devices used by businesses, is positioned to benefit as companies upgrade their computer networks. Investors have been bidding up the stock, anticipating massive growth when companies start to dole out cash to improve and expand their businesses.That stance was dealt a big blow in November, when the company said its biggest client, EMC (EMC), would be carrying over its inventory to 2010 and ordering fewer parts after slower-than-anticipated sales. This caused the company to cut its revenue forecast to $101 million to $103 million, or about $5 million less than analysts expected. Was it justified for the company to lose three-quarters of its market cap because of a $5 million revision? Probably not, but it highlights the fact that growth potential is driving this stock. When its potential falls into question, the value of its stock drops.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV