This Week's 5 Dumbest Stock Moves
Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. Let's take a look at five dumb financial events from this week that may make your head spin.
1. Don't Nook now
Shares of Barnes & Noble (NYS: BKS) popped 15% higher Tuesday after posting encouraging growth with its fledgling Nook e-reader platform. Sales of Nook products and related e-book downloads soared 140% in the bookseller's latest quarter and now account for nearly 20% of net revenue.
That is welcome news, but why did investors forget about the crumbling fundamentals at the retailer itself? The quarter was a disaster. Barnes & Noble posted a huge deficit and sales rose by only 2%.
Remember that 140% surge in Nook sales? That's baked into the pitiful 2% overall growth. Back that out, and sales would have actually fallen by 11% for the period.
Barnes & Noble may have a winner in its Nook Color, but will that change in a few weeks when the market-leading Kindle comes out in vivid tablet form as expected?
2. No revival for Credence
It was a bad week for LTX-Credence (NAS: LTXC) after the semiconductor testing equipment specialist posted a disappointing quarterly report.
The company's fiscal fourth quarter wasn't good, but it wasn't horrendous. LTX-Credence's adjusted profit of $0.27 a share on $62.7 million in revenue clocked in just shy of Wall Street's expectations.
However, its guidance for the current quarter -- targeting a small deficit on $35 million to $39 million in revenue -- is the dagger. Analysts were banking on strong sequential improvement. Obviously they're not going to get it.
3. The HP way
Armed with a clearance-bin hit, Hewlett-Packard (NYS: HPQ) isn't ready to kill the TouchPad just yet. The flop of a tablet -- introduced at $499 in July, but cleared out for as little as $99 in August -- resulted in huge demand at the new price point. Why not? Component tracker IHS iSuppli estimates that these gadgets cost $306 to make. Who wouldn't want to pay $0.32 for a dollar?
HP appears to have no problem throwing good money after bad, announcing this week that it will be making a limited second production run of the tablets.
What? Well, there could be a good explanation here. Several of its hardware partners have plenty of component parts already, so it may be doing them a favor. However, HP better not think that this is a good omen for the fledgling webOS platform it acquired from Palm for $1.2 billion last year. The main reason why these cheap tablets are selling is because enthusiasts have found a way to turn them into Android and Linux tablets.
4. Until the last pin drops
The hurdle just got higher for AT&T (NYS: T) . The Department of Justice is filing a suit to block its proposed acquisition of T-Mobile, a move that may cost AT&T both strategically and in its pocketbook.
Regulators fear that the purchase would be detrimental to consumers since T-Mobile's low-end offerings would likely be nixed.
AT&T is scrambling to make this work, especially since it's on the hook for billions in termination fees if the deal doesn't close. AT&T even promised to bring back 5,000 call center jobs it's outsourcing overseas, also noting that the move would not result in any stateside job losses for current AT&T or T-Mobile call center employees.
This is getting ugly, isn't it? AT&T is now making concessions that will make it harder to achieve the synergies that made the deal so logical when it was originally announced.
5. Susquehanna squash banana
Some analysts shouldn't dream out loud. Susquehanna sent a note to its clients suggesting that a strategic buyer could acquire Janus Capital (NYS: JNS) for as much as $18 a share.
That's a pretty aggressive buyout target for a meandering mutual fund manager that closed at $7.30 Wednesday, before the Susquehanna report. How high did Janus pop on the news yesterday? Well, it didn't. The stock may have opened higher on the note, but reality eventually sunk in. Who wants to pay that kind of premium for a mutual fund company?
Let's assume that the market has already forgiven Janus for its improprieties nearly a decade ago. It's just a bad time to be -- much less acquire -- a mutual fund company. There have been six consecutive weeks of mutual fund outflows, and investors are flocking to the more flexible ETFs with lower expense ratios that some discount brokers are offering sans commissions.
I'm not suggesting that Janus won't be a tempting acquisition target in an industry ripe for consolidation to combat the headwinds, but $18 -- a price Janus shares haven't seen in nearly three years -- is insane.
Which of these five moves do you think is the dumbest? Share your thoughts in the comments box below.
At the time this article was published Motley Fool newsletter serviceshave recommended buying shares of AT&T. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy. Longtime Fool contributorRick Munarrizis 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 Hewlett-Packard. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
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