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Tale of the Tape

Zacks Equity Research

Should You Get Rid of NeoPhotonics (NPTN) Now?
July 01, 2014


Trades from $3
Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

One such stock that you may want to consider dropping is NeoPhotonics Corporation (NPTN - Free Report) , which has witnessed a significant price decline in the past four weeks, and it has seen negative earnings estimate revisions for the current quarter and the current year. A Zacks Rank #5 (Strong Sell) further confirms weakness in NPTN.

A key reason for this move has been the negative trend in earnings estimate revisions. For the full year, we have seen 2 estimates moving down in the past 30 days, compared with no upward revision. This trend has caused the consensus estimate to trend lower, going from a loss of 79 cents a share a month ago to its current level of a loss of 92 cents.

Also, for the current quarter, NeoPhotonics has seen 2 downward estimate revisions versus no revision in the opposite direction, dragging the consensus estimate down to a loss of 27 cents a share from a loss of 22 cents over the past 30 days.   

The stock also has seen some pretty dismal trading lately, as the share price has dropped 12.5% in the past month.

So it may not be a good decision to keep this stock in your portfolio anymore, at least if you don’t have a long time horizon to wait.

If you are still interested in the broader Computer & Technology sector, you may instead consider some better-ranked stocks including Broadcom Corp. , Marvell Technology Group Ltd. (MRVL - Free Report) and Avago Technologies Limited (AVGO - Free Report) . While Broadcom and Avago Technologies hold a Zacks Rank #1 (Strong Buy), Marvell Technology Group holds a Zacks Rank 2 (Buy) and may be better selections at this time.

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