Be careful when buying stocks that are trading near 52-week lows.
There is often a good reason behind a stock's decline, such as disruptions in its industry or decreasing market share. But sometimes the culprit is shortsighted fear from an earnings miss that causes a stock to become oversold.
Cray Research has been making supercomputers since the 1970s, and founder Seymour Cray was a tech star when Steve Jobs was still tinkering in his garage.
With the mountains of unstructured data that aren't easily organized, supercomputers are still a big deal, and Cray Research is having a resurgence. That is because despite improvements in computing and giant leaps in data storage, standard computers can't process the volume of data generated for academic, commercial and government purposes fast enough.
Shares of Cray Research fell 30% in the first week of August, dropping to $21.80 from $31.
On Aug. 2, the company reported a wider-than-expected second-quarter loss of 29 cents a share, compared with analyst expectations of 26 cents a share. Revenue of $100 million for the quarter also missed analyst expectations of $101 million.
Chief Executive Peter Ungaro said that Cray Research's management was forced to lower its outlook due to delays from its suppliers and a fire at a production facility.
Delays integrating new chips from Intel and Nvidia have hurt the company's ability to take new orders. Also, the fire at one of Cray Research's facilities is expected to lower full-year 2016 revenue estimates by more than $100 million.
The fire was an isolated event, and once Cray Research integrates the new chips, its stock should appreciate.