Early Cloud Service Investors Never Had a Prayer
Nearly one year ago, the trading world was searching for a way to capitalize on the explosion in "Cloud Stocks of the Future", and if you bought into this phenomena and bought shares in Castlight Health, Inc. ($CLST) you bought the top of the market at $42 per share...and never saw the light of day.
Shares fell yesterday to $6.54 per share after a downgrade from Canaccord, and all I have to say is "why are you even covering it unless you are trying to raise money for them?" I didn't look back at what Canaccord was saying one year ago, so a bit more research would be in order before I toss anyone under the bus, so lets just chalk it up to being too early picking cloud stocks. This is normal in equity trading and research. In fact, I can give you a list of stocks for which investors and portfolio managers were early. Let's take look at a few:
Books-A-Million Inc. ($BAMM) - Fell from $40 to $3 in 2 weeks
Blucora (formerly Infospace) ($NSP) - The stock fell from $1305 to $2.67 between 1998 and 2000
Webvan Group Inc. ($WBVN) - Was considered the representative flop of the dot com boom/bust
Castlight hasn't exactly performed well, but clearly, it's not quite fair to put it in this category.
Castlight provides cloud-based software for enterprises in the United States. The company's software enables enterprises to control their health care costs. Castlight offers enterprise healthcare cloud through a suite of applications that transform complex data from various internal and external sources into transparent and useful information for employers, their employees and their families. It also provides communication and engagement, implementation, customer support and training services. Castlight Health, Inc. serves employers in a range of industries, such as education, manufacturing, retail, technology, and government. The company was formerly known as Ventana Health Services and changed its name to Castlight Health, Inc. in April 2010. Castlight Health, Inc. was founded in 2008 and is headquartered in San Francisco, California.
The irrational behavior of equity trading is not new, and there are stories upon stories of stocks that took the pipe. I do not think cloud stocks have reached any of the upside. Further still, technology associated with this sector will boom with inventive ideas about how to utilize the cloud at some point, but let us not forget about disasters of the past..there are many to choose from!
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