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The earnings has led to a sharp 10-11%

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investora2z   Saturday, 08/24/13 07:10:24 AM
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The earnings has led to a sharp 10-11% correction in the stock. It had made its 52 week high of $9.40 on August 6 just before the earnings. The last trading session saw a large drop backed by abnormally high volumes of 300K. This is against the average 3 month volume of less than 50K shares. There were no positive surprises, and the gross margins reduced from 23.8% in Q2'12 to 22.3% in Q2'13. The revenues increased by about 22% on a yoy basis from nearly $80 million in Q2'12 to around $97 million Q2'13. However, the net loss increased to $4.38 million compared to net loss of $4.3 million in Q2'12. This was against the trend of sequential declines in net loss over the last couple of quarters. Even the revenues declined sequentially. For H1'13, the sales increased to $194.99 million (compared to $163.47 million in H1'12). The net loss in H1'13 declined to $7.24 million or 22 cents per share ($10.286 million or 32 cents per share in H1'12). Third party products comprised nearly 80% of the sales. One important reason for correction was that the stock had already appreciated significantly over the last few months. This had made it important for the company to deliver a positive surprise in the earnings to maintain the uptrend. The correction can run deeper, and the next few quarters will be extra important for the company. If there are negative surprises, then the trend may change decisively. The company needs to increase the pace of growth in topline, and, more importantly, improve the margins. Here, high growth potential offerings from smaller companies may be identified as the margins are better in those deals. Chromadex Corporation (CDXC) has launched a couple of high potential molecules recently. Vitacost can look for other products which may be more in line with its product segment focus.

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