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. Penney arcane
In a move that was long overdue, J.C. Penney finally dismissed Ron Johnson as its CEO. The stock tanked on the news because the reeling department store chain merely fished out former CEO Mike Ullman to serve as its interim helmsman.
A dynamic CEO may come, but after the flashy Johnson fizzled, it remains to be seen if J.C. Penney can be saved at all.
Johnson's plan to do away with sales and couponing while remaking the stores by introducing "store within a store" brands hasn't panned out. J.C. Penney's sales plunged 25% last year. We're talking about $4.3 billion in net sales, and things weren't going so well before that. Obviously. It's why the company turned to Johnson in late 2011.
However, the red flags were there from the beginning. His refusal to move to Texas -- and hiring many key executives who also raced back to their home states before the workweek was even over at a time when it should've been "all hands on deck" -- was telling. Pushing out policies before testing them was arrogant.
Letting Johnson go may be the right thing to do, but let's kick off the list this week with this item, because J.C. Penney waited too long to act in the first place.
2. The fall and fall of Microsoft
Consumers are becoming finicky maids. They don't do Windows.
Shares of Microsoft fell 4% yesterday on disappointing data for the PC industry.
Trend-tracker IDC is reporting that PC shipments plunged 13.9% worldwide during the first quarter. This is the sharpest year-over-year drop since IDC began tracking quarterly PC shipments 19 years ago.
Microsoft took a pounding because it's clear that consumers no longer care about Windows as an operating system. Casual users are perfectly fine with the smartphone and tablet approach to computing, and it's Android and iOS that are the mobile platforms of choice.
We live in operating-system-agnostic times, outside of those who still need PCs for work or play. It's no wonder that Goldman Sachs downgraded Microsoft after the IDC report was published.
3. BlackBerry in a blender
BlackBerry has been bringing out the worst in analysts this week.
- MKM Partners analyst Michael Genovese argues that BlackBerry is losing relevance after commissioning a survey that found few people were excited about the new BlackBerry 10 mobile operating system. He has a sell rating on the shares and a $10 price target.
- Detwiler Fenton's channel checks show that some retailers are taking in more returns of Z10s than they are selling now that the initial push is over. BlackBerry went on to refute those claims in a statement.
- ITG Research is arguing that the sales trend is quite weak for the Z10.
- Pacific Crest analyst James Faucette may be slightly more upbeat, as his channel checks show modest sales of the new phone, but he's not budging from his underperform rating.
Bulls will argue that the bearish analysts will only see what they want to see, but when so many start to chime in with unflattering perspectives, there's often some kernel of truth in there.
4. Dry milk
Pandora may have hit a meaty milestone this week, but it only illustrates how poorly it's been doing in milking revenue out of its audience.
The leading streaming service announced that it has now surpassed 200 million registrations since the site was launched eight years ago. Half of those registrations have taken place during the past two years alone.
Keep in mind that these are registrations. These aren't necessarily people actively on the site. Pandora reported 69.5 million users logging into the service last month. That's not too shabby, but obviously it's not 200 million.
However, if Pandora throws us a big number, it makes itself available to be bludgeoned by the same sum.
If 200 million registrations is impressive, consider that Pandora cranked out just $51.9 million in subscription revenue last year. That breaks down to just $0.26 per account over all of 2012. There are too many freeloaders at Pandora, and this seemingly flattering milestone isn't very flattering to the service's model.
5. In security
Shares of Fortinet tumbled 13% on Thursday after the company issued problematic guidance.
The network security provider sees a first-quarter profit of $0.10 a share on $134 million to $136 million in revenue. The refreshed guidance falls short of where Wall Street's perched, as analysts were targeting net income of $0.12 a share with more than $140 million on the top line.
At a time when companies are showing signs of life and network breaches continue to dominate the news, investors certainly weren't expecting bad news out of Fortinet, especially since it had easily surpassed market expectations in its prior quarter.
You may have followed some losers this week, but there's always time to get it right the next time.
Learn about the key opportunities and potential pitfalls facing Pandora in The Motley Fool's special premium research report. All you have to do is click here now to subscribe to this invaluable investor's resource.
The article This Week's 5 Dumbest Stock Moves originally appeared on Fool.com.Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. 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.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.