And the shorts go after AFFX:
Monday January 28, 3:46 pm Eastern Time
Affymetrix stock falls on short recommendation
(UPDATE: adds analyst comments, details, updates share price, paragraphs 4-6,9,11-14, previous NEW YORK)
LOS ANGELES, Jan 28 (Reuters) - Shares of genetic analysis firm Affymetrix Inc. (NasdaqNM:AFFX - news) slumped on Monday following a published report recommending that investors bet that the company's stock will decline, according to analysts.
Shares of the Santa Clara, California-based company were down 13.5 percent, or $4.94, to $31.84 late on Nasdaq, after slumping about 20 percent earlier to a session low of $29.50.
Several brokerage and analyst firms cited a report from buy-side consulting group Off Wall Street, based in Cambridge, Massachusetts, for the stock's tumble. Analysts said the report suggested investors short sell Affymetrix's stock, a technique used to profit from an anticipated decline in a company's stock price.
``This is a hair trigger environment. This sector tracks technology and there have been some disappointments,'' said Merrill Lynch analyst Paul Kelly, citing last week's warning from Applied Biosystems Group (NYSE:ABI - news), which makes equipment for analyzing genes, of lower-than-expected earnings.
An official at Off Wall Street confirmed that the firm published a note on Affymetrix, but the report could not be immediately obtained. On its Web site, the consulting group says it ``seeks to identify stocks that have the potential to make 50-percent downward percentage moves. These stocks most often have relatively high valuations, and are going to have negative earnings surprises.''
Officials at Affymetrix could not be immediately reached for comment.
'MORE VULNERABLE'
``The company is reporting earnings in a couple of days, so this is an opportune time for a company to come out and short a stock, because Affymetrix is unlikely to comment prior to earnings,'' said Punk, Ziegel & Co. analyst James Ackerman, citing the ``quiet period'' before earnings statements.
``This makes them more vulnerable,'' he said.
Affymetrix is scheduled to report its fourth-quarter results after the market's close on Wednesday. Wall Street analysts on average expect the company to post a loss of 5 cents a share, according to research firm Thomson Financial/First Call.
Affymetrix makes GeneChip, a tool used to analyze genetic variations and markers for disease. Drug and biotechnology companies purchase Affymetrix's products in attempts to discover new drugs.
Core GeneChip revenues are expected to rise 25 percent in the fourth quarter from a year earlier, while overall revenues are seen at $61 million, up just marginally from $59.4 million in the same 2000 quarter, said Paul Kelly, an analyst at Merrill Lynch. He cited the phase-out of the company's individualized gene array technology and a series of one-time licensing fees in 2000 for the anticipated flat revenue.
Kelly earlier this month cut his mid-term rating on Affymetrix to ``buy'' from ``strong buy'' based on market valuation, the product phase-out and customer stocking.
The analyst, who has a 12-month price target for Affymetrix of $40, said he expects Affymetrix to post 27-percent revenue growth this year.
``We are bullish about their business in 2002 and beyond,'' Kelly said.
I've never owned AFFX, but it's starting to look attractive at these levels. It's a miserable environment for biotechs right now, so likely no great hurry.
Peter |
