This Week's 5 Dumbest Stock Moves
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. Bears need to be more timely
Bernstein Research analyst Carlos Kirjner lowered his firm's price target on Netflix (NAS: NFLX) this week. Kirjner now sees the video giant hitting $71, below his earlier goal of $79.
There's nothing wrong with a Wall Street pro hosing down a price target, but why now? Shares of Netflix have climbed better than 50% since bottoming out in the low $60s two months ago. Drawing attention to the earlier $79 mark is embarrassing, and taking that down makes things even worse.
Kirjner's bet, one would think, is that Netflix's quarterly report next week will be a bloodbath. That is certainly possible, though Netflix has already revealed that it cranked out 2 billion hours of streaming content during the quarter. In other words, those who are using it are apparently using the streaming service quite a bit.
Near-term losses and costly international expansion may sting for now, but an analyst ignoring a revitalized stock's momentum is dangerous.
Kodak doesn't make the list this week because of its dire financial situation. It's the folks still buying the stock that make the cut for this week's "dumb" tribute.
Speculators will see yesterday's close of $0.36 and think that they have a shot at a sweet payday if the stock nudges higher. Unfortunately, the grim reality is that most bankruptcy proceedings find the filers wiping out the common stockholders.
Creditors will make sure that they milk any equity dry. Yes, Kodak has patents, but even if it's able to find buyers at fire-sale prices, that may not even be enough to satisfy the $950 million in bridge financing that it secured as part of the bankruptcy. If Kodak emerges from this -- and that in and of itself is not a given -- it will be new stock issued to the secured creditors that will begin trading.
There will always be exceptions to the bankruptcy rule, but those buying in thinking that they'll be the lucky ones shouldn't be surprised when these $0.36 lottery tickets expire worthless.
3. Reach out and gouge someone
Surely there must be a commodity play in buying data, because it keeps getting more expensive for smartphone customers. AT&T (NYS: T) is bumping its data plan rates higher this weekend. The move is for new customers. Holders of current AT&T accounts don't need to freak out just yet. However, this is a problematic trend.
Let's go over the new rates.
|Expensive||200 MB for $15||300 MB for $20|
|More Expensive||2 GB for $25||3 GB for $30|
|Way More Expensive||4 GB with tethering for $45||5 GB with tethering for $50|
Source: The Verge.
The three pricing tiers -- and I'm making up the names of these tiers, of course -- are going up by $5 a month. Yes, AT&T is packing in more data, but not enough for someone in one plan to be able to feasibly go down to the one below it.
AT&T is smart in grandfathering in existing customers to old rates, making them less likely to jump ship. However, if smartphones are going to penetrate deeper into mainstream markets, shouldn't data rates be getting cheaper? AT&T is making it more prohibitive for new customers to sign up, and these are the same late adopters who wait until pricing drops to more reasonable levels.
If new wireless account growth stalls at AT&T, you'll know why.
4. Workout doesn't work out
Majesco Entertainment (NAS: COOL) was one of last year's hottest stocks, more than tripling on the success of its Zumba Fitness video game. Now it's having a problem staying on its feet.
Shares of Majesco took a hit after a shockingly bad quarterly report on Tuesday night.
After consistently blowing Wall Street away with better-than-expected results, Majesco wrapped up fiscal 2011 by posting an unexpected loss. Its guidance for fiscal 2012 isn't very inspiring. The low end of the range implies flat revenue growth and a slight dip in profitability.
5. Big problem at Big G
Google (NAS: GOOG) wraps up this week's list by posting disappointing results last night.
Google's fourth-quarter revenue grew 25% to nearly $10.6 billion. Back out traffic acquisition costs to arrive at $8.1 billion and that's less than the $8.4 billion that the pros were forecasting. It only gets uglier on the bottom line, where adjusted earnings climbed 9% to $9.50, well short of the 20% gain that Wall Street was modeling.
Google may have generated a 34% pop in paid clicks, but advertisers were paying 8% less per lead than they were a year ago. Ouch! Obviously this is a global company and there's a crisis taking place throughout Europe, but seeing sponsors generate cheaper clicks through the world's largest online advertising provider is troublesome.
At the time this article was published The Motley Fool owns shares of Google.Motley Fool newsletter serviceshave recommended buying shares of Netflix and Google. 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 contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story, except for Netflix. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.