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Skullcandy, Inc. Message Board

  • valueinvesting123 valueinvesting123 Aug 29, 2013 10:21 PM Flag

    The 10% Drop in Skullcandy Shares

    Starting in the middle of last week shares of Skullcandy went on a run, up almost 20%. Starting on Wednesday most of those gains were erased and shares have been struggling to keep their momentum.

    Below is my analysis of why shares dropped:

    Shares were up with the release of the new credit line and hiring of Ms. O'Neil to the board of directors. Wednesday as we know shares drop 7% and Thursday we see no gains. This could just be a correction from the over buying but I believe it is more than that.

    On Wednesday Skullcandy did their first press release on the signing of Brasilian soccer player Thiego Silva. He was announced prior in the earnings call and a few social media posts by Skullcandy but the posting on Skullcandys blog was his first introduction which really gave us more information.

    I believe Skullcandys news release on Thiego Silva is what created the major sell off(because I dont agree with this is why I have found the opportunity to buy

    1. The signing of represents Skullcandys major push to traditional sports. This is a change in the company's image which could result in them loosing their brand image

    2. The import tariffs and sales tax Brazil is putting on Skullcandys headphones makes them very expensive in Brazil. Brazil is still a developing economy and the market for people who can afford headphones and especially expensive imported headphones is possibly small.

    3. Revenue has been declining in North America, if Skullcandy has to look to the emerging markets they might be in trouble

    4. One thing that did scare me was the quote by Skullcandys EMEA marketing manager. I was not aware they had such an emphasis on emerging markets so this helps connect to point 3

    5. I know from watching the trade order that most of Skullcandys trading volume comes from high speed trading firms which use computer algorithms. This has caused Skullcandy to be very volatile and they dont always get it right

    Sentiment: Strong Buy

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    • I don't think there is enough volume to speculate anything. Its just drifting around and will continue to do so until there is clear information, good or bad. 146k shares today is peanuts. A 10k block at market will move this 2% up or down.

      • 1 Reply to gatorlabs75
      • Yes, but my post is in reference to Wednesday when shares of Skullcandy dropped 8% on heavy volume. I also dont believe the stock is drifting around either. In a short period of time shares dropped to below $5 then above $6, thats an over 20% move and now there down to $5.30. These movements are much more than what the market has done

        Sentiment: Buy

    • Skullcandy's revenue right now mainly comes from North America but their growth going forward is going to come from the Emerging markets and also Asia.

      The health of those markets is very important to Skullcandy so it is possible shares of Skullcandy can start to trade or become heavily influenced by news from those geographic regions

      Sentiment: Buy

    • Interesting, though I think you are looking way too hard for reasoning and it's as simple as the fact that the shares will remain rangebound until the company provides a real reason to move significantly higher or lower.

      Buy at/below $5.25 sell at/above $5.75 - repeat.

      • 1 Reply to o08o.ugh64w
      • The pattern of buy $5.25 and sell above $5.75 im sure has been a profitable trading pattern for you but eventually that pattern will be broken. I am interested in researching why shares of Skullcandy move because then you will be able to see the next move ahead of the market, or at least be prepared when it does come. Shares of Skullcandy don't move with the market so what makes them move? There is most likely no direct correlations out there but I don't believe stock prices are a random walk down wall street. I view share prices as what the market values a company at. So what changes every week that makes the market value Skullcandys business at $140, $150, or $160MM. Those jumps are more than just a change in terminal value.

6.310.00(0.00%)Aug 30 4:00 PMEDT