StemCells (STEM) Stock Declines Signal A Buying Opportunity


StemCells Inc (NASDAQ: STEM)

StemCells has had an incredibly volatile week in the market. On Tuesday, after the company announced a key acquisition, the stock climbed dramatically, making it to the week’s high of $2.84 per share. However, by the end of the day Friday, the stock had fallen to $1.24 per share, which is still a great improvement over this week’s opening price of $0.37 per share. Today, we’ll talk about why we’ve seen the recent declines, what we’re seeing in after-hours trading, and why I believe that we’re likely to see big gains in the long run out of STEM.

Why STEM Took A Dive

Shortly following the acquisition news, we saw a correction in the value of StemCells. However, that’s not the only reason we saw such big declines in the value of the stock towards the end of the week. In fact, on Thursday, a new reason for downward movement emerged.

On Thursday, an SEC filing was seen from STEM. In the filing, the company said that it would accept warrant exercises from shareholders to purchase common stock. The big problem here wasn’t necessarily the fact that it would accept the warrant exercises, the issue was at what price. The company put a price on these at $1.10 per share, a steep discount from the current trading price. However, this price expired on Friday at the close of the market. All warrants exercised moving forward will be honored at $10.20 per share.

As a result of the news, the stock saw massive declines on high volume on Thursday. That movement continued on Friday, when about 11 million shares traded hands. This was well above the company’s 30-day volume average of 2.29 million shares.

What We’re Seeing In After-Hours Trading

At the moment STEM isn’t having the best time in after-hours trading. However, the declines have slowed significantly. In fact, in after-hours trading, the declines have actually slowed to a crawl. At the moment, StemCells stock is trading at $1.23 per share after a loss of $0.01 per share (0.81%).

What We Can Expect To See Moving Forward

While the week ended badly for STEM, I have an overwhelmingly bullish opinion of what we can expect to see from the stock moving forward. All in all, the merger with Microbot Medical is an incredibly positive move. The combination of the two companies will yield assets that have a higher value than the sum of the two parts.

Analysts weighing in on the stock also seem to have an overwhelmingly bullish opinion. In fact, there are 3 analysts who are currently covering STEM. Between these three analysts, the low price target is at $12 per share and the high at $36 per share. The average price target on the stock is currently $22 per share. Even at the $12 per share price target range, the low end of analyst opinions gives StemCells stock an upside of nearly 1,000%. All in all things seem to be going great for STEM, and analysts see that. At the end of the day, I’m expecting to see long-run gains out of this stock.

What Do You Think?

Where do you think STEM is headed moving forward? Join the discussion in the comments below!

[Image Courtesy of Wikimedia]


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