Shares of Adesto Technologies Corporation (NASDAQ:IOTS) are struggling in the late afternoon session as the stock is down 0.42% thus far today reaching $2.37.
Let’s look at some of the reasons as to why a stock’s price could experience a sudden drop in price.
Shareholder sell-off – Institutional shareholders create a target price to sell their stock at. This results in in that the supply of available shares will depresses the share price. If institutional selling is driving down the share price, the stock price often jumps quickly one the selling is over, as long as the company’s fundamentals remain intact. Long-term investors see this as a great buying opportunity.
Research notes – Sometimes a sell-side analyst will release a negative research paper on the company right before or right after their earnings totals are released. Even if the note is only slightly negative, it can affect the way that the company’s clients think. Though individual investors might not have access to these reports, the large news agencies will reveal that a report has been issued, or the company itself might reveal information about the existence of the report. The savvy trader could be able to use this information as an opportunity to buy once the selling pressure falls back.
Falling short of “the whisper” – Often, a firm will exceed the Street estimate, yet fall short of meeting the whisper number, resulting in a decline in its stock price. The “whisper number” is an unofficial estimate or rumor that is making the rounds in Wall Street. There isn’t much an investor can do to counter this, though it could explain a sudden sell-off.
Faulty numbers – There are sometimes fundamental reasons for a stock price to decline after earning numbers are announced. Perhaps the company’s margins have fallen significantly from the last quarter, or it could be that its cash position has dramatically declined. Investors would be wise to review earnings announcements to determine if the company beat estimates and how they did it. Any shortcomings in the firm’s financial standings are bound to be reflected in the share price before too long.
Future guidance – Public companies conduct conference calls after their earnings are released. In these calls, management often make predictions or provide some kind of guidance about future prospects for the firm. Investors must realize that any guidance that is different to what the investment community is expecting can have an impact on the stock price.
The stock stands -7.00% away from its 50-day simple moving average and also -44.99% away from the 200-day average. Recently, the commodity stands -72.12% away from the 52-week high and 19.70% from the 52-week low. The RSI (Relative Strength Index), an indicator that shows price strength by comparing upward and downward close-to-close movements is 50.56.
Wall Street analysts have a consensus recommendation of 2.00 on the shares along with a price target of $4.67.
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