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.The greatest flub of all
Last weekend's death of music icon Whitney Houston gave Sony (NYS: SNE) yet another shot at this weekly list, potentially keeping its spot warm here for next week's launch of the overpriced PS Vita.
On Sunday, two of Houston's "best of" compilations were marked up dramatically on iTunes in Britain. The Ultimate Collection saw its price marked up a mindboggling 60%, going from $7.85 to about $12.50. The Greatest Hits was treated to a 25% increase from $12.50 to $15.67.
The move was only limited to Britain, but the opportunistic move came at a time when Houston's catalog was spiking as a result of her death.
Defenders of Sony's move will call it a case of supply and demand. Like Jeremy Lin rookie cards, events do trigger changes in value. Surely Houston items spiked in value on eBay after her death. However, we're talking digital distribution here. Supply is infinite.
More importantly, it took Sony two entire days of online outrage before responding to the matter. Sony now claims it was a mistake by a single employee. Really? Rogue traders at Sony?
Weak guidance for the quarter and some problematic trends were more than enough to offset the leading genealogy website's feat of besting Wall Street's fourth-quarter targets on the top and bottom line.
Subscriber acquisition costs spiked sharply higher while average monthly revenue per subscriber inched sequentially lower. Paying more for customers who are paying less is an unwelcome sight though churn is thankfully inching lower after a recent pricing tweak that encourages long-term subscriptions.
The upside to the crummy report is that Ancestry.com is still growing and now fetching just 16 times this year's projected earnings and 13 times next year's bottom-line target.
3. Shorting with friends
Zynga's (NAS: ZNGA) heady stock run since Facebook filed to go public came to at least a temporary pause after the social gaming giant posted its first quarterly report as a public company.
Despite reasonable growth in books and improvement in several key metrics, there is one area where Zynga is falling woefully short, and that's daily active users.
On a sequential basis, average daily active users have now declined for three consecutive quarters. Sure, monthly active users continue to climb nicely. How can it not? Zynga introduced a dozen new games through 2011. However, what's happening to the people that couldn't get enough of Zynga's casual games that they had to check in every day?
Average Daily Active Users
|Q1 2011||62 million|
|Q2 2011||59 million|
|Q3 2011||54 million|
|Q4 2011||48 million|
Source: Zynga filings.
Zynga was named after the founder's loyal bulldog, but daily active players are apparently not as faithful.
Yes, Vonage is profitable -- and growing on the bottom line -- but flat revenue growth isn't going to woo too many growth stock investors.
Making matters worse, the Web-based phone service is looking to ramp up its spending in a move that will ding margins this year. Vonage is earmarking an additional $5 million to $10 million per quarter in expenses through 2012.
5. Black and Blue Nile
We're heart-deep in Blue Nile's (NAS: NILE) peak season. The online high-end jeweler typically cleans house this time of year between holiday bling and Valentine's Day gifts. Well, we still don't know how the current quarter will play out, but it was a blue Christmas for Blue Nile.
The e-tailer fell woefully short of what the pros were expecting. Net sales declined 2% decline to $112.3 million. Analysts were banking on a $123.2 million on the top line. Blue Nile's profit of $0.30 a share wasn't even close to Wall Street's estimate of $0.42 a share.
It's at this point where some investors may be looking to call off their engagement with the stock, though Blue Nile's pricey shiny accessories will naturally begin selling again when the economy truly bounces back.
At the time this article was published Motley Fool newsletter services have recommended buying shares of Ancestry.com and Blue Nile. 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.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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