Insider selling isn't always a sign of rough waters ahead -- the insider might need the money for Junior's education, or for other reasons that have nothing to do with the business. And while stock dilution can be a bad thing, splitting a stock to make more shares available can be good in some cases.
Don't look down
What about lowering guidance? When a company forecasts lower sales or profits, its stock usually takes a hit. It's not always easy to tell whether your company is having a fire sale or it's burning down. Maybe it is time to get out — or maybe it's time to buy more!
To help tell the difference, we pair up the dour guidance news with the sentiments of more than 180,000 members of Motley Fool CAPS. If the best stock-pickers think the companies still have the power to turn lemons into lemonade, maybe investors should take notice.
Here are two stocks that have recently announced reduced guidance:
CAPS Rating (out of 5)
Acme Packet (NAS: APKT)
Juniper Networks (NYS: JNPR)
Don't blindly sell into their bearish outlook — you still need to do some research. Use the announcement as a jumping-off point for additional research.
Lowering the boom
It looks like AT&T (NYS: T) may have had a hand in the dimmer outlook for both Acme Packet and Juniper Networks as it struggled to hold the T-Mobile merger together. Now that the deal has fallen through, there are likely going to be other ripples on the pond as well.
Last quarter Acme suggested it was a timing issue with a large order from AT&T that caused the shortfall it reported. Yet the lower results underscored how weak business really was, since analysts had been anticipating strong results even without the Ma Bell business. Now Acme is saying the North American telecom industry in general is the cause for a weaker outlook. If nothing else, Europe and Latin America have remained robust, but one has to wonder how the precarious financial situation on the continent will affect future results there.
And Brazil, South America's biggest economy, actually contracted 0.04% in the third quarter, so these other engines of growth might seize up as well.
Not only has AT&T husbanded its resources, but Verizon as well has sharply trimmed capital expenditures. That would certainly explain why Juniper had to rein in expectations too. Both of them have been its primary customers and "economic challenges" have slowed new orders to a snail's pace.
It shouldn't have come as too much a surprise though since Cisco (NAS: CSCO) - which has a dominant slice of the router market - essentially set the pace last November with its constrained look, though it said it was anticipating a return to its former glory. That could be why both Acme and Juniper are trading higher since their respective announcements: They were "known knowns."
It could also be why 88% of CAPS members rating both telecom plays see them outperforming the broad market averages. But with the investor community assigning a low, two-star rating to Juniper, they're suggesting there are better places for your money at the moment.
CAPS member Clint35 says that place may be Acme Packet.
This company helps make calls and videos over the Internet work better. As phone calls over the internet become more common this company will grow. It's real close to its 52-week low, so now is a good time to buy.
Looking under rocks
These stocks may have lowered expectations, but The Motley Fool has identified three companies that are quietly cashing in on the explosion of smartphones and tablet PCs. You can get instant access to these companies by clicking here -- it's free! But only for a limited time, so hurry.
At the time thisarticle was published Fool contributorRich Dupreyowns shares of Cisco Systems, but he holds no other position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Cisco Systems. The Fool owns shares of and has created a bull call spread position on Cisco Systems.Motley Fool newsletter serviceshave recommended buying shares of Cisco Systems and Acme Packet. 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.
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