Why Sierra Wireless Shares Jumped 10% Today

What happened

Shares of Internet of Things hardware specialist Sierra Wireless (NASDAQ:SWIR) traded higher on Friday, reaching a gain of 11.3% at 3:45 p.m. EST. The company didn't have any news to report today, but investors appear to have decided that Thursday's drastic price drop was too sharp after all.

So what

Sierra's fourth-quarter report showed slowing top-line growth and lower earnings, inspiring a slew of immediate analyst downgrades and target price cuts. By the end of Thursday, the stock had taken a 27% haircut.

Again, the company didn't have anything new to add to the discussion on Friday. It simply started drifting higher in the early morning, and the gains kept coming all day long. As we head into the weekend, Sierra Wireless has erased about half of Thursday's huge price drop.

Image source: Getty Images.

Now what

This is not an unusual trading pattern for a volatile micro-cap stock like Sierra Wireless. First, investors ran for the exits as Sierra showed a fairly weak hand in its fourth-quarter results and next-quarter guidance. After sleeping on the numbers, some came back to pick up shares at a quick discount. After all, management did outline a new cost-cutting program and several next-generation product development ideas in order to kick-start the stalled growth engines again.

This stuff is par for the course when you're looking at smaller companies with a history of rapid growth and high valuation ratios. Sierra Wireless fits that bill and acted exactly like a volatile micro cap this week.