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. Teething pain for the E*TRADE baby
Things didn't go well for E*TRADE (NAS: ETFC) traders this week. Shares of the discount broker with the colorful E*TRADE baby ad campaigns fell nearly 15% yesterday after the company surprised investors with a quarterly deficit.
Analysts were banking on a profit of $0.20 a share out of the Web-savvy financial services provider, reversing a loss from a year earlier. Well, the market had to settle for merely a narrower deficit.
The culprit here was E*TRADE's move to increase its loan loss provision. Yes, E*TRADE's ill-advised foray into mortgages a few years back continues to rear its ugly head.
Surely the E*TRADE baby will find a way to bounce back with a memorable Super Bowl ad next weekend, but the brokerage itself will have more to prove.
2. India red ink
Once again, Rediff.com (NAS: REDF) has proven itself unworthy of a place in your portfolio.
The second-tier dot-com portal in India put out one of its more offensive quarterly reports this week.
Revenue fell by 19% to a mere $4.8 million. Back out a one-time gain and the speculative online company posted a widening loss.
The weak rupee and steep decline in its stateside publishing business weighed down the company's performance, but even its India online business still fell by 7% in local currency terms during the quarter.
Since India is the world's second most populous nation, speculators tend to gamble on Rediff as a way to play the inevitable dot-com boom there. Unfortunately, Rediff has yet to prove itself worthy of those coattails.
3. Angry gamers go for the "quit" button before "continue"
Video game enthusiast blogs began to light up with chatter about Microsoft's (NAS: MSFT) next console.
The Xbox 720 -- and that's not the official name -- may hit the market in time for next year's holiday shopping season, according to IGN. The website also reveals that it will have six times the sheer processing power of the current Xbox 360.
So far, so groovy.
However, sources are telling Kotaku that the new console will have an "anti-used game system" that won't play borrowed or secondhand titles.
This would be a shocker, but we may as well heap this into the "dumb" column this week in case Microsoft's trying to float a trial balloon to see what kind of outcry this would generate.
It's easy to see why Microsoft and publishers would like to see this kick in. They don't make any money on the popular resale of used games. However, gamers definitely would move on to the PS4, Wii U, or any other platform available at that time that didn't tell them what they can and cannot do after buying a game.
Microsoft worked hard to make the Xbox the top console in 2011. Let's hope it doesn't blow it next year by getting too cocky.
I won't knock Swinburne for the odd move of lowering his rating -- from overweight to equal weight -- while at the same time raising his price target from $2 to $2.30. This is a valuation call on Swinburne's part, and Sirius XM has definitely appreciated in recent weeks.
No, what makes this a "dumb" move is that Swinburne's basing his action largely on fears that subscriber growth will decelerate in 2012. He sees just 1.3 million net additions this year, after the satellite radio giant added 1.7 million accounts to its rolls in 2011.
So what? Of course subscriber growth is likely to decelerate. The real story in 2012 will be earnings and free cash flow growth. Rates are inching higher. Programming costs are inching lower. This is shaping up to be a good year for widening margins even if net additions don't play along.
5. Monster under the bed
You know the irony is oozing when you're a leading online recruiting website that has to hand out pink slips of your own.
Monster Worldwide (NYS: MWW) wrapped up a problematic quarter in which it had to let go of 400 employees, or 7% of its workforce.
Shares of Monster fell 20% yesterday after the company revealed the layoffs as the economic turmoil in Europe led to a weaker-than-expected quarter and a soft prognosis for the current quarter.
At the time this article was published The Motley Fool owns shares of Microsoft.Motley Fool newsletter serviceshave recommended buying shares of and creating a bull call spread position in Microsoft. 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. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
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