3 Stocks Giving Back More Than the Dow
The Dow Jones Industrial Average on Friday gave back all the gains (and a little more) that it had achieved the day before, tumbling 140 points, or 1%, as the unemployment rate ticked higher again. While certainly better than expected after the unbelievable numbers put out by the Bureau of Labor Statistics the month before, the rate revealed an economy that is still sickly and unable to support the kind of job creation needed for growth.
As bad as things were with the index, however, the three stocks below were even worse, plummeting by double-digit percentages as earnings -- or lack thereof -- did them in. Now don't go running over the cliff with them like a bunch of lemmings: It could just be a temporary situation. Let's first see whether they had good reason to fall, as panic-fueled routs can sometimes lead to excellent buying opportunities.
Pitney Bowes (NYS: PBI)
Skullcandy (NAS: SKUL)
Glu Mobile (NAS: GLUU)
With the U.S. Postal Service on the brink of bankruptcy as individuals opt for faster forms of communication like email and fax, it's no surprise that the leader in metered mail, Pitney Bowes, is seeing its business marked "return to sender."
Its small and medium business market saw revenues fall 6% from last year while enterprise-level business revenue dropped 5%. But things are getting so bad, particularly in Europe, that Pitney Bowes will end its service that delivers mail and catalogs outside the U.S. in a bid to rein in costs. Revenues fell 6% to $1.2 billion as profits plunged 56% to $0.38 a share, though adjusted earnings would have come in at $0.47 a share, but still below analyst expectations.
While its figure is nowhere near the $20 billion the USPS wants to cut from its operating expenses by 2015, Pitney Bowes still wants to get rid of between $45 million and $55 million in costs. Yet even it admits the company and the industry are in a "critical period," which is why we're likely seeing rivals like Stamps.com (NAS: STMP) thrive. Stamps.com also reported quarterly results, but the e-stamp leader trounced Wall Street's forecasts and guided higher for the coming year.
It's hard to see the metered mail provider making it out of the gloom of night it finds itself in, but let me know below if you think Pitney Bowes can still mail it in
Headphone maker Skullcandy got its head handed to it on Friday after the company dramatically lowered its outlook for the full year, cutting earnings to a range of $1.00 to $1.04 per share from $1.10 to $1.20 previously.
While sales grew 17% in the quarter, coming in above analyst expectations, the company only met profit forecasts, and as it pushes into higher-end products, it's finding it will be enjoying lower margins. With prime retail outlets like Best Buy (NYS: BBY) and Target moving into the promotional holiday season, Skullcandy discovers it can't see very far ahead and opts for cautiousness. Good thing, too. Best Buy accounted for more than 10% of its sales in 2011 and it continues to struggle with bringing customers in the door.
Without much more than a brand logo to differentiate it from rivals like Beats by Dr. Dre, Soul by Ludacris, or even gear put out by Sony (NYS: SNE) , JVC, and Bose, Skullcandy has no moat to really protect it. It may have value as a takeover candidate by one of its competitors, but I've rated the accessories maker to underperform the broad market averages on Motley Fool CAPS. Tell me in the comments section below if you think its stock, let alone its headgear, is worthy eye candy.
Mobile game maker Glu Mobile also enjoyed higher quarterly revenues but got kneecapped just like Pitney Bowes and Skullcandy because its guidance was terribly weak. Yes, sales jumped 19% in the third quarter, but it predicted revenues well below Wall Street's forecasts and said it expected to record losses in the fourth quarter of $0.05 to $0.06 per share, whereas analysts had anticipated a penny in profits.
A few weeks ago I expressed my doubts that Glu's reliance on the "freemium" business model would serve it well. It derives 80% of its revenues from the "free to play, pay to play more" service, but noted that players weren't enthusiastic about its new game launches in the quarter. More problematic may be changes to Apple's (NAS: AAPL) advertising policies for the iPhone, which restricts apps that provide links to other apps that aren't its own. Glu relies heavily on advertising too, and that will likely hurt revenues. I see no reason to change my underperform rating on the game maker either, but you might still feel the stock is in play.
Ready for a resurrection
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The article 3 Stocks Giving Back More Than the Dow originally appeared on Fool.com.Rich Duprey owns shares of Apple. The Motley Fool owns shares of Apple, Best Buy, and Skullcandy and is short Sony (ADR) and has the following options: long JAN 2013 $22.00 calls on Sony (ADR). Motley Fool newsletter services recommend Apple and Best Buy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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