Shares in online travel service provider Wotif.com Holdings Ltd [ASX:WTF] enjoyed a bounce of nearly 1% today, with the stock trading up as much as 3% intraday. It’s been a long way down, though: the stock is coming up off its all-time lows.
Usually stocks goes up when more investors come to love the company’s story. But sometimes stocks rise purely because investors start to hate them a little bit less.
Wotif has suffered under selling pressure this year as investors have marked down internet-focused technology stocks around the world. But the market appears to be telling us that the worst may be now be over for Wotif. The company looks like it can at least meet the profit forecasts that it slashed in December.
Part of the reason why Wotif’s profit forecast was lowered was because of an increased investment in technology and marketing. The market now seems to be viewing that as money well spent.
Combine that with a fully-franked dividend yield north of 7% and you can see why this stock has started to appeal to investors again. People are recognising value at these levels.
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It can be quite risky to buy speculative stocks after they’ve been beaten down. But Wotif’s business model is proven and the company appears to have wisely invested for future growth. This could be one of those times when buying a stock that’s fallen out of favour ends up providing great returns.
Tim Dohrmann+
Small-Cap Analyst, Australian Small-Cap Investigator