This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Watch 3 high risk stocks for potential bargains

Stocks in this article: AAPL CRUS MKTO P

Chris Lau, Kapitall: When high risk stocks sell off, they offer potential bargains at their lows.

It is hard to reduce risk ahead of the curve, especially for stocks that move upwards, undisturbed. Pandora’s (P) stock is an example of a speculative play whose uptrend broke down quickly at the beginning of March, 2014.

Since then, the stock is down around 40 percent. Worry that the Ukraine-Russia tension will escalate and high valuations in various tech issues are some of the reasons the downtrend could continue.

Lower forecast

Pandora issued a second quarter revenue forecast that was lower than expected. The company expects revenue to be no higher than $218 million. The consensus estimate was revenue of $219.3 million. For the full-year, Pandora’s guidance is within consensus.

Demand for Internet radio service is still healthy. Pandora’s revenue is up 69 percent from last year.

In the application software space, former high flier Marketo, Inc. (MKTO) regained some lost ground after shares peaked in January, 2014 at $45. The company, which makes marketing automation software, issued second quarter guidance that was above consensus. Marketo expects to generate revenue of between $33 and $34 million. For the full year, the company expects to lose $1.00 – $1.06 per share. Analysts expected the company to lose $1.12 per share.

Buying at the bottom

Cirrus Logic (CRUS) is an example of buying based on low valuation that pays off. The semiconductor maker bottomed at $16.46 in the past year. Cirrus Logic reported first quarter revenue and earnings that exceeded estimates. Bullishness also grew when the company forecast gross margin will be at the high end of the 47% – 49% range.

Cirrus Logic’s revenue relies heavily on Apple (AAPL), which explains why its valuation is so low. To broaden its offering, the chip maker said last month it was buying Wolfson Microelectronics (WLFMF). This will take out a competitor and open opportunities in the MEMS microphone market. The acquisition will also help Cirrus Logic lower its reliance on Apple.

Bottom line

Investors are becoming less tolerant of risk. Stocks promising high growth but valued as such sold off and could continue to do so. Astute investors should be mindful that richly valued stocks may continue to correct.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs