Last Week's Biggest Head-Scratchers: Google Slashed, LivingSocial Marked Up, Lumber Liquidator Chopped
Wall Street can be fickle, leaving investors scratching their heads in bewilderment. Here are some of last week's biggest surprises, blunders, and just flat out boneheaded moves.
Big Trouble for Big G: Analysts at Morgan Stanley downgraded shares of Google (GOOG) on Friday, lowering their price target from $645 to $600.
Morgan Stanley is slashing its rating on the stock, from overweight to equal weight. That may be good news for a Weight Watchers weigh-in, but it's not a good switch if you're an investor in the world's largest search engine.
Morgan Stanley's pros do have their reasons for souring on Google, but why go public with the change of heart just a few trading days before the dot-com darling's quarterly report? Google has trounced Wall Street profit targets in nine of the past 11 quarters. Does Morgan Stanley really want to get in front of that kind of batting average?
The Days of Living Socially: CNBC and The Wall Street Journal reported on Friday that daily deals website LivingSocial has narrowed its search for underwriters to take the upstart public later this year.
New IPOs are like babies: Everybody loves the new additions until it's time to change the diaper.
The reason that LivingSocial doesn't pass my sniff test is that the flash sale speedster is reportedly looking to raise $1 billion in a deal that will reportedly value the company between $10 billion and $15 billion. That's a whole lot of money for a company that commands roughly half the market share of Groupon, according to deal aggregator Yipit.
Unless I can get a prepaid voucher to buy into LivingSocial at half-price, I'll pass.
Slumber Liquidators: Mr. Market can be a bit of a lumberjack some weeks. Shares of Lumber Liquidators (LL) were cut down by nearly 30% last week, after the flooring retailer provided a gloomy near-term outlook.
This isn't the first time that the chain that specializes in hardwood planks at wholesale prices has talked down its financials. Back in November, it blamed a woeful implementation of a new enterprise software system for its fiscal shortcomings. Lumber Liquidators is no longer trying to pin the blame elsewhere. Customers aren't buying hardwood to spruce up their homes the way they used to, and the chain is offering steeper discounts than usual in a move that sacrifices margins for the sake of generating sales.
If that fails, why not stock up on marshmallows, graham crackers, and chocolate bars and begin selling its planks as firewood?
It's All About Timing: Lumber Liquidators wasn't the only public company to hose down expectations on its latest quarterly performance. Affymetrix (AFFX) and NetScout (NTCT) also warned that they would come up woefully short when they report on the three months that ended in June.
The disappointments make sense once you consider each company's bread-and-butter business.
Affymetrix toils in genetics analysis, and it's blaming academic customers for the slip. With cash-strapped institutions of higher learning scaling back research as endowments dry up, it's easy to see Affymetrix missing out.
NetScout monitors uptime for companies where it's critical that their websites don't go down. NetScout's primary clients are government websites and financial institutions, two of the sectors that are reeling in light of budgetary shortfalls and a recent dearth of trading and banking activity.
NetScout's the one that gets my goat by waiting until 8 p.m. last Monday to break the bad news to its shareholders. Remember where you were last Monday night? It was the Fourth of July! You were probably firing off bottle rockets with the kids or wiping mustard off your chin. NetScout tried to bury the unwelcome news, since the uptime specialist knows about the public's downtime during a market holiday.
Really? Wendy's has fewer restaurants open now than it did three years ago. It botched its breakfast menu rollout. Store-level sales have been sluggish. It's also getting pretty crowded among the burger flippers, as Five Guys and In-N-Out continue to expand aggressively.
Where's the growth going to come at Wendy's? Wedging berries into a vanilla Frosty and calling it a parfait isn't going to be enough. You are missed, Dave Thomas.
I know that I can't be the only one left scratching my head.
Longtime Motley Fool contributor Rick Munarriz does not own shares in any of these companies. The Motley Fool owns shares of Google and Lumber Liquidators.
