Cyren Up 200% In Two Days – Meme Stock Or Problem?

Cyren Ltd (NASDAQ: CYRN) stock is up 200% and more, over the past two days, including this morning’s premarket. That’s something of a substantial move in what has recently been something of a dog of a stock. The thing for us to ask is, well, is this the result of some substantial turn in the fortunes of the business? Or are we watching something more dangerous to our wallets going on here?

It is possible to make the case for Cyren having improved prospects. The company does cloud-based cybersecurity and has a wide client base. We can imagine that in time of war spending on such security will increase and so those companies that provide it will benefit. Both Palo Alto Networks and SentinelOne, larger and better-known companies in the space, have benefitted from this effect. But their stock prices are up 10 to 20%, not the 200% that Cyren has gained.

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It’s also possible to think about the recent performance of Cyren. As we noted they’ve just gone through a one for 20 reverse stock split. The usual reason for such things being that long-term dismal performance risks leaving the stock price below $1 and thus the loss of the NASDAQ quote. It should be said that the reverse split did boost the Cyren stock price above that danger level but then it continued its decline even so. There’s very little, other than this market gossip about the war, as an objective reason for this 200% stock price rise.

There are plenty of subjective reasons though, to do with market sentiment. The success – and fun if we’re honest – of GameStop and the like has left a substantial number of speculators looking for the next meme stock. For one of these to succeed all that’s necessary in the short term is for enough people to believe that it will succeed. Sure, it’s good if there’s a substantial short interest that needs to buy back in the face of a rising price – that’s what will sustain a surge – but just decent buying pressure in a small company will trigger. Cyren’s market valuation is around the $11 million mark, after all, it doesn't require much buying to move the price.

What matters to us as investors – well, speculators is a better description here – is why the buying pressure? At which point things don’t look all that good for sustained pressure. Not that we’d call out by name, but there’s at least one significant social media influencer who has been recommending the stock. Perhaps that is enough to push the buying fury along. But the absence of any actual corporate news doesn’t create great faith in the staying power of the price changes.

A useful stance at this point is that the share price at Cyren is simply moving because the share price at Cyren is moving. It’s a momentum trade that is. And the trick with those is to work out when the momentum is going to stop and then, likely enough, reverse. It’s not obvious that there’s any substantive reason for the price changes here. So, any trade needs to be done with the utmost caution and the understanding – perhaps assumption – that what is being traded isn’t really the Cyren stock but everyone else’s evaluations of where it’s going to go.