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 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)
Previous or Consensus Estimate
NVIDIA (NAS: NVDA)
Q4 11 revenue
PotashCorp (NYS: POT)
Q1 12 EPS
Source: Yahoo! Finance.
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.
Don't get washed out by this stock
Investors are aware of the risks associated with concentration of customers, suppliers, and distributors, knowing the impact it can have on operations and performance in the event of a disaster. Not too many probably considered country risk outside of geopolitical considerations. So when devastating floods inundated Thailand last August, few investors were likely anticipating the widespread reverberations it would cause across the tech landscape.
Even five months later, the ripples are still spreading across the pond. Chip maker NVIDIA is just the latest tech company to revise guidance downward as a result of the floods and the shortages caused in hard-disk drives. And there's probably more yet to come.
Computer makers like Dell (NAS: DELL) and Hewlett-Packard (NYS: HPQ) got through the Christmas season OK because the units they were selling had been made and shipped before the floods. It's going to be over the first and second quarters of 2012 (and possibly beyond) that we'll see the impact of the shortages.
NVIDIA had the added problem of reduced demand for its Tegra 2 chip, partly as a result of the pending introduction of its next-generation product, but it got washed out for the current quarter regardless. CAPS member Irwin2go still believes in the long-term growth story, however:
Tablet and phone market. Best hardware solution. Also quad ARM plus graphics core could be low cost win 8 platform.
Add NVIDIA to your watchlist, then tell me in the comments section below or on the NVIDIA CAPS page whether you think it can swim against the tide.
No green thumb
The precarious global financial situation is weighing down more than just banking stocks, even dampening demand by farmers for planting crops. As a result, PotashCorp says dealers are being cautious about their inventories of fertilizer ingredient potash, believing they'll get better prices come springtime. Crumbling prices took down fertilizer companies last year -- PotashCorp lost 40% from peak to trough before rebounding this month -- and Arthur Pinkasovitch, a member of the Motley Fool Blog Network, notes that Mosaic (NYS: MOS) has also noted overly cautious buying patterns as crop prices were pummeled. He believes another acquisition attempt may be made for PotashCorp as a result.
This low-price environment opens the door for BHP Billiton to attempt another shot at making an impact on Canada's strict potash market, potentially revitalizing sector. Even without an acquisition, the demand for potash is continuous, especially with the rise of the working class in China who aim to improve their diets.
But it's also seen as just a temporary situation. Prices are expected to recover and demand will perk up later on this year. Add PotashCorp to the Fool's free portfolio tracker and be notified when it sprouts new opportunities.
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 the names of these companies by clicking here -- it's free! But only for a limited time, so hurry.
At the time thisarticle was published Fool contributorRich Dupreyholds no position in any company mentioned.Click hereto see his holdings and a short bio.Motley Fool newsletter serviceshave recommended buying shares of and writing puts on NVIDIA, as well as writing covered calls on Dell. 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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