TA Setup typically used for option scalps: looking for a turn/bounce off lower Bollinger Band. Key TA is compression of %B and ADX. Also Trix 3 up thru Trix 7, CMF 3 up and final Aroon crossover. The PPO chart suggests Fibs 38.2 retrace to 45.40 level.
Catalyst: Multiple Downgrades and initiated Sell partially based on assuming the Electric Car market growth rate may be exaggerated (I can't speak to this assertion), combined with a customer announcement of their entry as a competitor to its Lithium Battery Separator segment (projected to begin production ~ August 2012). This article summarizes the short argument.
Another argument for the downgrade was due to insider selling-- and while that is true, the last selling was done in August and not all transactions were straight sells (e.g. 10b5-1 trading plan).
The exact issue concerning the customer turned competitor is suspect not by virtue whether it is true or not, but by what exactly they are going to produce. According to a Needham Analyst, the miss-assumption was that they would be producing separators for the Electric Car market (which is the "core growth" segment for PPO) but according to his conversation with a representative from the customer turning competitor that is not the case. He states they will be producing separators for the electronics "sub-segment" of the Lithium Battery separator segment and as such, the overall impact to PPO will not be as presumably detrimental as the stock's trading on 1/31 suggested.
A good quick pro/con segment was broadcast on CNBC (Link here)
Key Points from Both Analysts: --Senior Research Analyst at DA Davidson: Downgrade to Neutral tgt $45 -- key issue: Lead-Acid Battery Separators (45-50% of business); Valuation Multiples coming down --Senior Analyst at Needham: Reiterated Strong Buy tgt $79 --key issue: Lithium Battery Separators (25-30% of business, but only 3-5% exposure to sub-specialty for separator); Core Growth Opportunity minimally impacted
True Segment Revenue Breakdown (based on 9 months ended Oct 1, 2011): Energy Storage: overall ~ 75% --Lead-acid battery separators: ~ 49% --Lithium battery separators: ~ 26% Separations media: overall ~ 25% Healthcare: ~16% Filtration and specialty: ~ 9%
Growth (based on 9 months ended Oct 1, 2011 as compared to 2010) : Lead-acid battery separators: ~ 25% Lithium battery separators: ~ 53% Healthcare: ~ 14% Filtration and specialty: ~ 12%
By my reading, the Lead-acid battery separator issues appear to be fair to argue; but the major impact to the stock price was due to the assumed impact to the Lithium battery separator's growth, which appears to be misguided.
Very conservative take could make an argument for a $45 price target and depending on how much one wants to lean to the $79 target...
Having said all this, the short interest before 1/31 was high: ~ 21% on a Reported Float of ~ 46.27 million shares and the trend was increasing since August at a significant pace (Link here). Bear Raid -vs- Short Squeeze seems to be in play
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