Editor’s note: This article was first published in July 2012 as a market note from 25 July: Gamesa closing at 1.0060 euros, down 97% from 36 euros, analyst targets of 2.50 euros and results due the next day. Gamesa merged with Siemens Wind Power in 2017, and Siemens Gamesa was delisted in 2023.
Gamesa is a renewable energy company that has lost around 97% of its value. It has gone from trading at €36 to struggling to stay above €1, a level it could fall below in the next few sessions unless… something happens.
Some analysts think Gamesa is in a “broken” sector (renewables), whereas I think it’s a sector with a future. Others think Gamesa is being punished for Spain’s poor situation, when 95% of Gamesa’s business is outside Spain. This company is worth studying as a stock because no logical criterion explains how it behaves on the market.
I could post dozens of videos in which it was one of the stocks analysts recommended most when it was trading at €6. At that price, they said, it was a real bargain, because the company was worth much more.
Later it fell to around €3, where once again they said it was time to get in, because it would be very hard to find it any cheaper. Finally, even when the company was trading at €2.14, the analysts gave up. They knew that price didn’t even match the value of its computer equipment alone, but they advised getting rid of it because of its poor technical picture. The technical outlook is bearish on every time frame (short, medium and long term, according to technical analysis).
Today, after opening 2.50% higher, it soon turned around and became one of the worst performers on the IBEX again, losing another 5.09% to close at €1.0060, while all of us wondered: what on earth happened?
In a normal situation, any IBEX company (in a normal market) that had announced deals and new contracts, as Gamesa did today, would have shot up on the stock market. It announced the sale of 4 wind farms in France and Germany and a new supply contract in China. As if that weren’t enough, Expansión reported that Gamesa may have returned to an operating profit in the second quarter, whose results it presents tomorrow after the market closes.
With other stocks, these 3 pieces of news together have produced gains of more than 15%, and those gains could not be considered purely speculative, because they show a company making progress at a difficult time for every business. Even if it doesn’t manage a 10–15% gain, what is clear is that there is no logic at all to a 5% drop.
The only thing I noticed in today’s session was heavy selling in the middle of the morning, which I suspect triggered some stop losses. After that, panic took hold of everyone else when they saw that what eventually happened might happen.
With the fear in the markets today, it seems that at the slightest doubt, when it comes to selling, the attitude is “last one out is a fool”.
Gamesa has been hammered by the bears, and because its market capitalisation keeps shrinking, it has become a very volatile company: a few purchases are enough to push the price up quickly and produce a quick profit, a profit that people tend to take very quickly in case the stock turns around.
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In fact, I’ve bought and sold Gamesa shares so many times that I almost feel like part of the company’s furniture. My intention has always been to hold it for the long term, but there’s no way, because I feel I have to put a very tight stop loss on it, and it doesn’t take long to trigger.
And I want to hold it in my portfolio because I know the company is worth much more than its share price shows, and not just a few cents more. I mean many euros more. Today some banks rate Gamesa a buy. Some give it a price target of €2.50, although this stock doesn’t listen to reason.
Let’s hope that tomorrow it holds that €1 support and that the results it presents are in line with expectations. Otherwise it could lose the €1 mark and go into total free fall towards €0.80 or €0.50, and that would complicate the stock’s whole technical picture.
Still, current market conditions are so complicated, and fear is so present, that we can expect anything from any stock in our index.
We’ll see tomorrow how Gamesa opens and what results it presents.
Featured image: Scottish Government, CC BY 2.0, via Wikimedia Commons.
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