Why Did My Stock Just Die?
CAPS Rating (out of 5)
|Vonage (NYS: VG)|
|Eagle Bulk Shipping (NAS: EGLE)|
Source: Yahoo! Finance.
The Dow fell 97 points yesterday, or almost 1%, so stocks that went down by even larger percentages are pretty big deals.
That's going to leave a mark
You gotta admit that once customers try a VoIP service, they typically like it and stay with it. That's not just anecdotal evidence, but is borne out by churn rates posted by Vonage, MagicJack VocalTec, and even enterprise-looking 8x8 (NAS: EGHT) .
Although Vonage got walloped by the market yesterday, its customers are staying put for the most part. A churn rate of 2.7% this past quarter was flat sequentially (though up slightly from the year-ago period), even though it initiated a new "no contract" policy. Even when callers are allowed to switch freely without penalty, they're staying with the service. Meanwhile, 8x8's churn is just 2%.
Vonage's problem is that it needs to spend more money to gain more clients. Such spending results in developments like its new mobile calling app, which the Fool's Anders Bylund thinks might alter the landscape of mobile communication. But it also pulls down profits.
The ephemeral nature of those profits likely contributes to the overwhelming negativity the CAPS community has toward Vonage. Just 31% of the nearly 1,600 members rating the VoIP provider think it can beat the market averages going forward. Add Vonage to your watchlist to see whether it can dial up new growth.
The Eagle has landed
With its stock swimming with the fishes, Eagle Bulk Shipping was swamped as fears of renewed financial crises in Greece and elsewhere in Europe flared anew. Iran is rattling its scimitar, threatening to cut off oil to six European countries in retaliation for sanctions against the rogue regime, though Saudi Arabia has said it could make up most of any shortfall from Iran.
An oil crunch would harm economic growth in a region already beset by predictions of a new recession. Demand for dry bulk goods would also take a turn south, helping to explain the decline in Eagle and much of the rest of the CAPS Dry Bulk Shipping sector, which was down 5% on average yesterday.
Eagle actually had been doing well in 2012, its stock more than doubling in value since the start of the year. There was hope the industry had bottomed, and not merely come to rest on the bottom of the ocean. Other market analysts think conditions will only get worse because fleet size will continue to outpace demand. The inventory glut has been a particularly pernicious disincentive.
CAPS All-Star naughtyguy says of particular concern to Eagle investors is the amount of debt it carries, as it will frighten off any would-be acquirer. Add the dry bulk shipper to the Fool's free portfolio tracker and let us know on the Eagle Bulk Shipping CAPS page if you think there's reason to hope it will yet be able to sail off into the sunset.
Ready for a resurrection
Just because your stock has taken a beating doesn't mean it's going to roll over and die. Markets are known for overreacting. Balance out the extremes by having a mix of stocks, funds, and ETFs that will help you maximize your retirement savings. You can find them in The Motley Fool's brand new report, "The Shocking Can't-Miss Truth About Your Retirement." This is a special free report that you can access right now simply by clicking here -- it's free.
At the time this article was published Fool contributorRich Dupreyholds no position in any company mentioned.Click hereto see his holdings and a short bio. 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.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.