This post was just published on ZYX Buy Change Alert.
RBCN is falling on earnings. The thesis behind holding this stock has nothing to do with earnings. Apple is making major investments in RBCN competitor GTAT for sapphire. If Apple introduces a sapphire screen, the competitors may also want to introduce sapphire screens to keep up. Since Apple has already locked up GTAT, RBCN should be the primary beneficiary of orders from Apple competitors.
At the time of the previous posts on RBCN, small cap growth stocks were favored by the market. Now the tide has turned. The market hates small cap growth stocks. RBCN is a small cap growth stock. The tide will turn again, but there is no way to know when that will happen. In the meanwhile, if the over all market turns down, stocks like RBCN will be hit very hard. In a bear market, RBCN can fall to about $5. At the same time, if sapphire demand increases, RBCN can easily rocket past the target zone of $16 to $18. If such a move happens with small cap growth stocks coming into favor, reaching a target of $30 may become realistic.
It is a high reward, high risk stock with potentially a lot of volatility ahead.
What To Do Now?
Those in the stock may continue to hold or trim the position size on any bounce in accordance with their own personal risk tolerance.
Those not in the stock and are aggressive may consider starting the smallest tranche such as 5 – 10% right here in the zone of $8 to $9. The plan will be to evaluate when appropriate to add more.
