5 Surprising Losers of the First Quarter
Naturally, if stocks are flat there will be some stocks that are down a lot more than others. Let's take a look at five the first quarter's most surprising losers.
3D Systems (DDD) - Off 36 percent in 2014
3D Systems has been the poster child of printers that crank out physical objects, but it may take time before 3-D printing grows beyond the novelty that it presently is with consumers. The printers still cost too much, and the printing process is still too slow. However, this would seem to be lucrative niche when eyeing the future. 3-D printing stocks in general and 3D Systems in particular were hot investments in 2013, but things aren't as solid as its printed products in 2014.
Groupon (GRPN) - Off 33 percent in 2014
Folks love bargains, and Groupon seemed to be bouncing back into popularity last year. Revenue started to grow again, and the daily deals leader was profitable in every quarter of 2013. The market's braced for another year of double-digit growth. However, after soaring 142 percent last year, shares of Groupon have fallen sharply every single month of 2014.
The stock's biggest drop came the day it posted its holiday quarter results in mid-February. The report seemed solid at first glance, but then analysts, including RBC Capital Markets, downgraded the stock or lowered their price targets. Groupon's guidance called for a small loss during the first quarter, and the pros weren't expecting that. Groupon shares had risen too far in 2013, and even though the flash sale giant is still trading well below its IPO price of $20, the market isn't convinced that the model is built for success over the long haul.
Twitter (TWTR) - Off 27 percent in 2014
After seeing Facebook's (FB) IPO rise like a Phoenix after initially tanking in 2012, investors weren't going to make the same mistake with fellow social media darling Twitter. Despite the lofty valuation at the time of its market debut, retail investors went on to bid up Twitter after its November IPO. The deal was priced at $26, but by the end of December it was fetching more than $63.
It's been a case of buyer's remorse in 2014 as investors accept that Twitter may be popular, but it's not as easy to monetize as Facebook. If Twitter starts slapping too many ads into the experience, folks may head elsewhere.
Twitter is still on firm financial footing. Revenue should soar 86 percent to $1.2 billion this year. The market's simply making a valuation adjustment.
Potbelly (PBPB) - Off 26 percent in 2014
Twitter wasn't the only hot IPO to come undone during the first quarter. Potbelly is a sandwich shop operator with more than 300 locations toasting subs and blending milkshakes. The challenging winter season hasn't been kind to many quick-service eateries, and even though Potbelly was one of the few to post positive comparable-store sales growth during the holiday quarter, growth has started to decelerate.
Analysts have been revising their profit targets lower. When the year began the pros felt that Potbelly would earn 39 cents a share this year and 52 cents a share come 2015, and now they are expecting earnings per share to clock in at 33 cents this year and 45 cents next year.
Office Depot (ODP) - Off 22 percent in 2014
When Office Depot completed its merger with OfficeMax late last year, it seemed as if the struggles of the country's second and third largest office supply superstore operators would be over. There would be economies of scale, redundancies to shave off and one less fierce competitor to deal with.
Unfortunately for Office Depot and even market leader Staples (SPLS) things haven't been that easy. Corporate America is still hesitant to ramp up its spending on toner cartridges, task chairs and ledgers. The threat of online rivals has only intensified.
A combined Office Depot and OfficeMax is clearly better than both companies on their own, but there are only so many problems that can remedied by hooking up a pair of laggards.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends 3D Systems and Twitter. The Motley Fool owns shares of 3D Systems. Try any of our newsletter services free for 30 days.