This Week's Five Dumbest Stock Moves
By Rick Aristotle Munarriz, The Motley Fool
Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. As I do every week, let's take a look at five dumb financial events this week that may make your head spin.
1. Dishing it out
When DIRECTV (DTV) grows up, it wants to be ... Netflix (NFLX)?
The leading satellite television provider is surveying some of its subscribers, according to digital media blog Zatz Not Funny. DIRECTV is asking if its couch potatoes are interested in a "streaming-only Netflix-like service for a flat fee per month."
You had me at "Netflix-like," but you lost me at "flat fee."
DIRECTV subscribers are paying an average of nearly $90 a month. Is the satellite television juggernaut trying to milk more out of its dish accounts? This could be a major tactical blunder. Cable providers are trying to nip cord-cutting in the bud by offering online streaming at no additional cost. Even if DIRECTV differentiates this service with premium content, consumers tired of paying perpetually escalating bills may not bother to stick around long enough to figure that out.
2. Don't bet against all satellites
Shares of Sirius XM Radio (SIRI) hit the $2 mark for the first time in nearly three years.
The new high comes just after a spike in short interest. There were more than 270 million shares sold short of the satellite radio provider as of mid-April. Some investors like to steer clear of companies with large bearish wagers, but I see that as the dinner bell of bullish indicators. Worrywarts moving to unload their pessimistic positions at the first whiff of upbeat developments often trigger substantial short squeezes.
As long as there are more catalysts than potential minefields, let the shorts have their picnic. Sirius XM hitting its highest price target since regulators cleared the merger between Sirius and XM after the uptick in shorting activity is all the proof you need.
3. Ay, robot
One of the hottest analyst thumpers over the past year has been iRobot (IRBT). The company behind the Roomba robotic dirt-sucking orbs and PackBot roadside bomb sniffers had blown Wall Street's profit targets out of the water in recent quarters.
Quarter | EPS Estimate | Actual | Difference |
|---|---|---|---|
Q1 2010 | $0.04 | $0.24 | 500% |
Q2 2010 | $0.08 | $0.20 | 150% |
Q3 2010 | $0.07 | $0.27 | 286% |
Q4 2010 | $0.14 | $0.26 | 86% |
Source: Yahoo! Finance.
Blowing past the pros by 86% or better over the past year gave iRobot healthy momentum heading into this week's quarterly report.
The trend was our friend. The company earned $0.27 a share in the first quarter, comfortably ahead of the $0.23 a share that analysts were targeting.
Why is iRobot on the "dumb" list after delivering yet another blowout quarter? Well, the robotic genius failed to bump its guidance for all of 2011 higher. When a company surpasses near-term expectations but fails to raise its outlook for the actual year, it doesn't bode well for the balance of the fiscal year.
4. No me digas
Shares of Quepasa (QPSA) have climbed 14% higher this week, and that's on top of a 41% pop last week.
Que pasa, Quepasa? A rumor is making the rounds, suggesting that Facebook is about to buy the Latino-focused social networking site.
Really? The chatter doesn't make a lot of sense. Facebook is already a global juggernaut, organically growing to more than 600 million registered users. Why would it buy into a bit player?
Quepasa also isn't doing so hot as a social networking site. The site may claim 33.6 million cumulative registrations, but divide that by the 214 million pages it served last month and it breaks down to just six pages viewed per user for the entire month of March. Stickiness, where are thou?
"These rumors are coming from trading sources and likely have no merit," StreetInsiders.com writes.
You think?
5. Playing games
Connected PS3 gamers got a double dose of bad news this week. Sony's (SNE) PlayStation Network has had some lengthy outages in recent days, upsetting its wired gaming community.
Now it turns out that hackers have swiped some personal user data. Sony claims that user credit card information was encrypted, but the same can't be said for user names, birthdates, passwords, and addresses.
The three consoles are in a brutal battle for supremacy, and these networking hubs help keep diehard gamers close. The outage and data breach will make it harder for Sony to compete for gamer attention.
Game over for Sony? Not yet -- but it just lost another life.
iRobot is a Motley Fool Rule Breakers selection. Netflix is a Motley Fool Stock Advisor recommendation. Alpha Newsletter Account, LLC has bought puts on Netflix. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
Longtime Fool contributor Rick Munarriz is a fan of dumb and smart business moves. Investors can learn plenty from both. He does not own shares in any of the stocks in this story, except for Netflix. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
More on The Motley Fool:
Get info on stocks mentioned in this article:
