With Tech Stocks Dipping Again, Is Now the Time to Buy?
Investors who didn’t jump into major tech stocks before their big surge in early April are getting a second chance to get aboard: Many of the stocks have fallen sharply in recent days and in some cases are approaching their pre-rally lows.
Whether investors should get aboard these stocks is another matter, analysts warn. The fact that many of these former leaders already have given up much of their rally gains suggests that hordes of investors were looking to exit the shares at the first sign of strength, to make up some of their losses.
By contrast, many other tech shares have held on to most of their early-April gains. Investors who focus on “momentum” in the market tend to look not only for stocks that rise strongly in a rally but also for those shares that hold up best when the market pulls back.
Some of the stocks that have led the tech sector lower in recent days also had bigger-than-average gains in the first three weeks of the month.
Optical networking components maker JDS Uniphase, for example, has fallen 36%, to $18.21 as of Thursday, since it reached a near-term peak of $28.53 on April 20. But the stock had zoomed 108% in the rally that began April 5.
By contrast, the Nasdaq composite index is off 6.7% from its peak reached April 19, after rising 33% from April 4 to April 19.
Cisco Systems rebounded 40% from April 6 to April 20 and has fallen 21% since, to $15.21 as of Thursday.
But the percentage changes can be misleading. Smaller percentage losses from the stocks’ peaks may be more significant, in dollar terms, than they appear.
A risk for some of these stocks is that they are already nearing their early-April lows, which in some cases were the lowest prices in years. If the stocks fall through those levels, investors who have held on could turn and sell in exasperation, analysts warn.
Cisco, at $15.21 now, is again nearing the $13.63 closing low price reached April 6. Sycamore Networks, at $7.90 Thursday, is just above its low price of $7.25 reached April 6.
The stocks could still turn out to be bargains, long-term, at these prices. But for investors who are more worried about making or losing money in the near term, the trend hasn’t been a friend to Cisco, Sycamore and others, experts say.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Pullback (Again) for Tech Leaders
Many tech giants have seen their shares pull back sharply in recent sessions after rallying dramatically in early April. Here’s a look at key stocks’ recent lows (most reached in the first week of April), their rally peaks (mostly around April 19) and how prices have come down from the rally peaks.
*--*
Ticker Recent Rally Thurs. Drop Stock symbol low peak close from peak JDS Uniphase JDSU $13.73 $28.53 $18.21 --36% FreeMarkets FMKT 6.44 13.36 9.01 --33 Sycamore Net. SCMR 7.25 11.18 7.90 --29 Sun Microsys. SUNW 13.04 20.71 15.78 --24 Check Point CHKP 41.38 80.01 60.80 --24 Cisco Systems CSCO 13.63 19.15 15.21 --21 Corning GLW 18.50 26.70 21.00 --21 Nortel Networks NT 12.88 17.80 14.50 --19 Oracle ORCL 13.25 20.32 16.90 --17 Hewlett-Packard HWP 27.41 32.50 27.95 --14 Qualcomm QCOM 43.88 66.33 58.05 --13 Intel INTC 22.63 32.49 28.64 --12 Nasdaq 100 index 1,370.75 1,953.28 1,763.33 --10 Nasdaq composite 1,638.80 2,182.14 2,034.88 --7 S&P; 500 1,103.25 1,253.70 1,234.52 --2
*--*
Sources: Times research, Bloomberg News
