The stock market seems to have hit a wall over the past month, with investors waiting to see more convincing signs of an economic rebound before they commit more money to stocks. In particular, many of the high-flying companies whose shares are listed on the Nasdaq have lost their former upward momentum and moved sharply lower since mid-February. Those declines may still have left longtime shareholders with sizable gains, but those who purchased their shares more recently may be wondering whether those companies’ best times are already behind them. As of just before 2 p.m. EDT Friday, the tech-heavy Nasdaq Composite (NASDAQINDEX:^IXIC) was very slightly lower, even as broader market indexes were largely posting gains.
Even so, a couple of Nasdaq stocks stood out as winners Friday. Root (NASDAQ:ROOT) benefited from favorable comments about its insurance business from an unlikely source, while investors in pre-production-stage mining company Piedmont Lithium (NASDAQ:PLL) got a boost as the business community looked favorably on the prospects for the electric vehicle industry.
Root drives higher
Shares of Root were up by 9% Friday afternoon after having risen as much as 20% earlier in the day. The upward move followed comments from an investment company that’s better known for panning overpriced stocks than for offering positive feedback.
Andrew Left of Citron Research has built a reputation for his short-selling calls, but late Thursday, he referred to Root as a company that many investors don’t truly understand. It’s easy to see Root merely as an auto insurance company, Left suggested, but its disruptive technology puts it in a different category in his eyes. Accordingly, Left believes that the stock should be trading above its IPO price, which even after Friday’s gains would be almost twice its current price.
Root takes advantage of the technological capabilities of modern smartphones to access detailed data about each specific customer’s driving habits. By seeing whether drivers make smooth or abrupt turns and whether they routinely brake hard to come to a stop, Root can make more informed decisions about which customers to take on and how much to charge them in premiums.
Insurance is a tough industry with intense regulation that makes it harder to innovate. Nevertheless, at least in Citron’s view, Root’s stock doesn’t deserve the shellacking it has taken in the months since its late October IPO. That had investors feeling better about the shares on Friday.
Piedmont Lithium was up by 4% on Friday afternoon. That, too, was down from its gain of more than 10% earlier in the day, but investors are working hard to get out from under the overhang of a recent secondary stock offering.
Until earlier this week, Piedmont had been on top of the world: The stock had tripled since the beginning of 2021. The company is making progress on its efforts to develop lithium mining and refining operations in the Piedmont region of North Carolina, and strong demand for lithium due to rising production of electric vehicle batteries seemed to guarantee a big market for Piedmont once it started producing the metal.
The upsurge took a pause on Wednesday, though, when Piedmont priced a secondary offering of 1.75 million shares. The offering fetched just $70 per share, which was more than 20% below the stock’s recent highs. That briefly knocked investors for a loop.
In the long run, though, Piedmont will need that cash to help it push through the start-up stage and into full production. Selling shares at relatively high levels was a smart move on management’s part, and investors seem to be acknowledging that out as they push the stock back upward from its post-offering levels.
Piedmont and Root have been moving in opposite directions lately, but both have solid prospects for long-term growth. That has shareholders feeling better about their stocks today, and it’ll be interesting to see what happens next to bolster their business prospects.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.