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. GameStop slips again
The market was taken by surprise this morning after GameStop posted disappointing guidance for the year ahead.


I questioned why the stock was nearing 52-week highs earlier this week, even though sales are slumping and the company had hosed down its same-store sales guidance four times over the past year.

Why were analysts still expecting sales and earnings growth into 2013?

Well, it's not going to happen.. GameStop's outlook calls for earnings for the new fiscal year to check in between $2.75 a share and $3.15 a share. This is a dip from the $3.17 a share it earned in the year that just ended in January, and analysts were expecting a profit of $3.42 a share. The midpoint of GameStop's forecast calls for a 4% decline in sales this year, and we've already seen what GameStop does to its top-line guidance over time.

2. BlackBerry beret
The market's impressed by BlackBerry's unexpected profit, but let's frame the troubled smartphone pioneer's quarter correctly.

The sequential decline in shipments has now stretched to five quarters on the news that it only shipped 6 million phones during the quarter -- and that includes a million new Z10 devices into Europe.



Q3 2012

14.1 million

Q4 2012

11.1 million

Q1 2013

7.8 million

Q2 2013

7.4 million

Q3 2013

6.9 million

Q4 2013

6.0 million

Source: BlackBerry press releases.

We're also seeing that BlackBerry's subscriber base shrank from 79 million three months ago to just 76 million today. Factor in results of this past weekend's disappointing stateside launch of the hyped up Z10 handset and it's hard to get excited about a small profit. Revenue fell 36%, and adjusted earnings plunged even more.

3. A sucker biotech investor is born every minute
imploded this week, and it's a cruel reminder to investors buying into young biotech companies hanging on a binary event.

ZIOPHARM shares crashed after releasing unfavorable phase 3 results for palifosfamide, the company's once-promising potential treatment for metastatic soft tissue sarcoma.

It's back to square one for ZIOPHARM as it tries to see if palifosfamide is useful for any other treatments. Investors aren't anxious to stick around. They know the company was aiming for its most likely malady in terms of efficacy by targeting soft tissue cancer, and now that that's shot down, things will get even harder the next time around.

4. Cliffhanger
Cliffs Natural Resources
has had a rough year.

The iron-ore miner's stock has shed more than half of its value this year alone through Wednesday's close, and Wall Street's still not seeing the value in the shares.

Morgan Stanley and Credit Suisse slashed their price targets for Cliffs this week, sending the stock even lower. Declining iron ore prices combined with high production costs stir up an unsavory cocktail.

Three months ago, Wall Street's average profit target was $2.97 a share this year and $4.20 a share come 2014. Now the pros are targeting just $1.72 a share in 2013 and only $2.42 a share next year.

5. Look out below
Five Below broke the cardinal rule when it comes to publicly traded rookies.

The retailer of items priced at $5 or below is offering up weak guidance for the new fiscal year.

Five Below has been a market darling since going public last year, and the IPO has earned its gains by beating Wall Street's targets in its first three quarters in the market's spotlight. However, the 244-unit chain is now forecasting a profit of no more than $0.03 a share on $92 million to $94 million in sales for the current quarter. Analysts were holding out for net income of $0.05 a share on $94.2 million in net sales.

That may still be reasonable growth for the retailer that has succeeded at making thrifty wares fashionable with teens and young adults, but it's hard to fall short of perfection when your shares are fetching more than 50 times this new year's projected profitability.

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Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of GameStop. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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