Why Fusion-IO (FIO) Soared Today

Tickers in this article: FIO

NEW YORK (TheStreet) -- Fusion-IO soared in Monday trading after news CEO Shane Robison and Legal Chief Shawn Lindquist bought a hefty number of shares. Robison purchased 105,500 shares at $9.52 a share, while Lindquist snapped up 11,000 for $9.50 a share.

Shares gained 13.6% to $10.85 late Monday morning and 8.2 million shares have changed hands compared to its three-month average daily trading volume of 4 million.

On Thursday, the flash storage maker crashed 24.4% after issuing lower-than-expected second-quarter guidance. The Salt Lake City-based business reported a first-quarter loss of $27.9 million, or 7 cents a share, on revenue of $86.3 million, and said it expects only a slight quarter-on-quarter revenue increase.

Fusion-IO also announced Chief Financial Officer Dennis Wolf's exit to pursue another opportunity and sales chief James Dawson's retirement.

TheStreet Ratings team rates Fusion-IO Inc as a Sell with a ratings score of D. The team has this to say about their recommendation:

"We rate Fusion-IO Inc a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Computers & Peripherals industry. The net income has significantly decreased by 809.3% when compared to the same quarter one year ago, falling from $3.93 million to -$27.90 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Computers & Peripherals industry and the overall market, Fusion-IO Inc's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$17.15 million or 159.81% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 64.03%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 800.00% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • Fusion-IO Inc has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, Fusion-IO Inc reported poor results of -39 cents a share vs. -8 cents a share in the prior year. This year, the market expects an improvement in earnings (-7 cents vs. -39 cents).