Value investors are primarily interested in the price of a security, though they need to do additional research to determine whether a cheap stock is a good investment. GuruFocus’ Guru Bargains screener shows the Guru stocks that have declined the most since they were purchased. The screener serves as a jumping-off point to get investing ideas for further analysis. Some stocks whose prices have nosedived may be quality companies facing a temporary setback, and others may be value traps in permanent decline.
According to the Guru Bargains screener, these are the stocks that have declined the most since Gurus purchased them: Zynga (ZNGA, Financial), Audience Inc. (ADNC, Financial), Groupon (GRPN, Financial), Education Management (EDMC, Financial) and Progenics Pharmaceuticals (PGNX, Financial).
Zynga (ZNGA)
Primecap Management more than doubled their holding of Zynga, a social game developer which held its IPO in December, in the second quarter, buying 118,350 shares at an average price of $8. The price has dropped more than 61% since then, to a price of $3.08 on Thursday.
After sliding several months, Zynga shares took a turn for the worse in July when it lowered its fiscal 2012 guidance due to “delays in launching new games, a faster decline in existing web games due in part to a more challenging environment on the Facebook web platform and reduced expectations for Draw Something,” according to Reuters.
Zynga revenue for the second quarter increased 19% year over year, but for the six months of 2012, it has lost $108 million, compared to net income of $18 million the prior year. The net loss included $95.5 million of stock-based expense in the second quarter. The company’s bookings also fell to $302 million for the second quarter, down from $329 million in the bookings in the second quarter the prior year. After two quarters of positive free cash flow, the company reported negative free cash flow of $210 million in the second quarter.
Zynga’s price is also down due to a plethora of insider sales after lock-up periods expired this year. The float will be comprised almost 90% by post-IPO lock up shares by the middle of August, according to MarketWatch.
Audience Inc. (ADNC)
Audience Inc. stock has fallen 65% since Leon Cooperman bought in the second quarter. Cooperman purchased 421,065 of the new holding at an average price of $19. Today the stock trades for $6.80.
Audience makes voice and audio processors for mobile products. It has created earSmart intelligence voice processors, which have “brain-like” technologies that enhance sound quality. The company’s market cap lost most of its value in September when it updated its business outlook. It informed investors that Apple would not likely be using its products in its next generation of iPhone. The change would not impact its third fiscal quarter, but would first affect financial results one quarter Apple begins selling its new phones.
The company raised its guidance for its 2012 third quarter based on its strong hardware shipments and forecast for the remainder of the quarter.
Audience just went public in May at $17 per share, valuing it at $330 million. Apple accounted for 37% of the company’s total revenue for the three and six months ended June 30, 2012. It had partnered with Apple since August 2008.
Education Management (EDMC)
Education Management’s stock has declined 62% since Michael Price bought 177,000 shares in the second quarter at an average price of $10. Its current price on Thursday is $3.52.
Education Management is a for-profit post-secondary education company. It has been facing declining revenue from declining student enrollment, influenced by a slew of increased or proposed government regulations aimed at protecting students from saddling themselves with overwhelming debt. Education Management’s new student enrollment for the three months ended June 30, 2012, declined 20.1% from the same period the prior year. It also posted a net loss of $1.5 billion, or $11.97 per share, in 2012, compared to net income of $229.5 million, or $1.66 per share in 2011.
In August, the company was also sued by the Department of Justice and four states, who believe the company fraudulently received $11 billion in state and financial federal aid from July 2003 through June 2011. Education Management has denied any wrongdoing.
Groupon (GRPN)
Shares of Groupon declined 59% since Wallace Weitz bought 300,000 shares at an average price of $11 in the second quarter. The stock is currently trading at $4.59 on Thursday.
Groupon had a strong streak of growth for a period recently. The number of active customers increased from 15.4 million in the first quarter of 2011 to 36.9 million in the first quarter of 2012. In the same span of time, free cash flow increased quarterly from $67 million to $310 million in the first quarter of 2012. In the second quarter, the company’s revenue increased 45% year over year to $568.3 million.
Competition in the daily deal business has become more intense as the company lost market share in the second quarter, according to Yipit, a site that tracks the daily deals space. Groupon’s market share shrank by 3 percentage points to 53%, its lowest level since the fourth quarter of 2011. Competitor Living Social gained 2 percentage points, and Travelzoo gained one.
Groupon’s market share loss resulted primarily from an estimated 2% decline in its daily deals. Most of its second-quarter sales growth came from its Groupon Goods shopping site, which it launched last year.
Progenics Pharmaceuticals (PGNX)
Progenics Pharmaceuticals stock has declined 59% since Jim Simons purchased 62,400 shares at an average price of $9 in the second quarter. The stock is trading for $3.81 on Thursday. Simons’ firm is run largely through automated processes based on mathematical algorithms.
Progenics is a biopharmaceutical company that develops treatments for diseases such as cancer. Its
stock price fell the most this year in July, precipitated by news that the FDA requested more clinical data
after reviewing its supplemental new drug application for RELISTOR (methylnaltrexone bromide) injection for the treatment of opioid-induced symptoms in adults with chronic, non-cancer pain. The drug already has been approved for other uses in more than 50 countries. Salix, the company it has partnered with on the drug, is slated to meet with the FDA to discuss the results.
The company then reported a net loss of $10.7 million or $0.32 per share in the second quarter, compared to net income of $55.5 million or $1.64 per share in 2011, due to payments it had to make on a collaboration with Salix. It was the company’s fourth consecutive quarter of losses. Revenue also declined to $1.8 million, from $74.4 million the prior year due to a decline in reimbursement revenue from its Salix collaboration and lower research grant revenue. It was offset by a $1.1 million increase in royalty revenue.
To see more companies that have become drastically cheaper since GuruFocus Gurus purchased them, see the Guru Bargain Screener by becoming a Premium Member.
According to the Guru Bargains screener, these are the stocks that have declined the most since Gurus purchased them: Zynga (ZNGA, Financial), Audience Inc. (ADNC, Financial), Groupon (GRPN, Financial), Education Management (EDMC, Financial) and Progenics Pharmaceuticals (PGNX, Financial).
Zynga (ZNGA)
Primecap Management more than doubled their holding of Zynga, a social game developer which held its IPO in December, in the second quarter, buying 118,350 shares at an average price of $8. The price has dropped more than 61% since then, to a price of $3.08 on Thursday.
After sliding several months, Zynga shares took a turn for the worse in July when it lowered its fiscal 2012 guidance due to “delays in launching new games, a faster decline in existing web games due in part to a more challenging environment on the Facebook web platform and reduced expectations for Draw Something,” according to Reuters.
Zynga revenue for the second quarter increased 19% year over year, but for the six months of 2012, it has lost $108 million, compared to net income of $18 million the prior year. The net loss included $95.5 million of stock-based expense in the second quarter. The company’s bookings also fell to $302 million for the second quarter, down from $329 million in the bookings in the second quarter the prior year. After two quarters of positive free cash flow, the company reported negative free cash flow of $210 million in the second quarter.
Zynga’s price is also down due to a plethora of insider sales after lock-up periods expired this year. The float will be comprised almost 90% by post-IPO lock up shares by the middle of August, according to MarketWatch.
Audience Inc. (ADNC)
Audience Inc. stock has fallen 65% since Leon Cooperman bought in the second quarter. Cooperman purchased 421,065 of the new holding at an average price of $19. Today the stock trades for $6.80.
Audience makes voice and audio processors for mobile products. It has created earSmart intelligence voice processors, which have “brain-like” technologies that enhance sound quality. The company’s market cap lost most of its value in September when it updated its business outlook. It informed investors that Apple would not likely be using its products in its next generation of iPhone. The change would not impact its third fiscal quarter, but would first affect financial results one quarter Apple begins selling its new phones.
The company raised its guidance for its 2012 third quarter based on its strong hardware shipments and forecast for the remainder of the quarter.
Audience just went public in May at $17 per share, valuing it at $330 million. Apple accounted for 37% of the company’s total revenue for the three and six months ended June 30, 2012. It had partnered with Apple since August 2008.
Education Management (EDMC)
Education Management’s stock has declined 62% since Michael Price bought 177,000 shares in the second quarter at an average price of $10. Its current price on Thursday is $3.52.
Education Management is a for-profit post-secondary education company. It has been facing declining revenue from declining student enrollment, influenced by a slew of increased or proposed government regulations aimed at protecting students from saddling themselves with overwhelming debt. Education Management’s new student enrollment for the three months ended June 30, 2012, declined 20.1% from the same period the prior year. It also posted a net loss of $1.5 billion, or $11.97 per share, in 2012, compared to net income of $229.5 million, or $1.66 per share in 2011.
In August, the company was also sued by the Department of Justice and four states, who believe the company fraudulently received $11 billion in state and financial federal aid from July 2003 through June 2011. Education Management has denied any wrongdoing.
Groupon (GRPN)
Shares of Groupon declined 59% since Wallace Weitz bought 300,000 shares at an average price of $11 in the second quarter. The stock is currently trading at $4.59 on Thursday.
Groupon had a strong streak of growth for a period recently. The number of active customers increased from 15.4 million in the first quarter of 2011 to 36.9 million in the first quarter of 2012. In the same span of time, free cash flow increased quarterly from $67 million to $310 million in the first quarter of 2012. In the second quarter, the company’s revenue increased 45% year over year to $568.3 million.
Competition in the daily deal business has become more intense as the company lost market share in the second quarter, according to Yipit, a site that tracks the daily deals space. Groupon’s market share shrank by 3 percentage points to 53%, its lowest level since the fourth quarter of 2011. Competitor Living Social gained 2 percentage points, and Travelzoo gained one.
Groupon’s market share loss resulted primarily from an estimated 2% decline in its daily deals. Most of its second-quarter sales growth came from its Groupon Goods shopping site, which it launched last year.
Progenics Pharmaceuticals (PGNX)
Progenics Pharmaceuticals stock has declined 59% since Jim Simons purchased 62,400 shares at an average price of $9 in the second quarter. The stock is trading for $3.81 on Thursday. Simons’ firm is run largely through automated processes based on mathematical algorithms.
Progenics is a biopharmaceutical company that develops treatments for diseases such as cancer. Its
stock price fell the most this year in July, precipitated by news that the FDA requested more clinical data
after reviewing its supplemental new drug application for RELISTOR (methylnaltrexone bromide) injection for the treatment of opioid-induced symptoms in adults with chronic, non-cancer pain. The drug already has been approved for other uses in more than 50 countries. Salix, the company it has partnered with on the drug, is slated to meet with the FDA to discuss the results.
The company then reported a net loss of $10.7 million or $0.32 per share in the second quarter, compared to net income of $55.5 million or $1.64 per share in 2011, due to payments it had to make on a collaboration with Salix. It was the company’s fourth consecutive quarter of losses. Revenue also declined to $1.8 million, from $74.4 million the prior year due to a decline in reimbursement revenue from its Salix collaboration and lower research grant revenue. It was offset by a $1.1 million increase in royalty revenue.
To see more companies that have become drastically cheaper since GuruFocus Gurus purchased them, see the Guru Bargain Screener by becoming a Premium Member.
