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. Oh no U didn't
We know that the Wii U has been a flop since its release last November, but did anyone thing it would be this bad?
Nintendo revealed on Wednesday that it sold just 160,000 Wii U consoles in its latest quarter. It has sold just 3.6 million systems worldwide since last year's debut, well short of expectations. However, seeing the platform collapse in the June quarter is brutal.
Nintendo itself did turn a profit. There was a nice bounce in software sales for its handheld 3DS system. However, Nintendo's about to be rubbed out of the console market with the more powerful Xbox One and PS4 on the way later this year.
Why didn't Nintendo come through with a price cut on the Wii U sooner? It needs an established base. Nintendo also sold just a little more than a million first-party games during the quarter, and that's perhaps even more troubling than the weak console figure. Even folks who have already bought the system aren't rallying around the in-house releases that have been so magnetic in the past.
The industry's changing, and Wii U appears to be the first casualty of this round of the console war.
2. Coach potato
It isn't easy being Coach these days.
With the economy showing signs of life, high-end shoppers are starting to buy premium handbags and accessories. They're just not buying Coach's products.
Coach took a hit after posting financial results that fell short of Wall Street expectations. Net sales may have climbed 6%, but North American comps actually declined 1.7%. North American comps have fallen in two of the past three quarters. Net income inched a mere 1% higher.
A pair of Coach executives also announced that they would be leaving the company at the end of the month.
The news contrasts at least one smaller premium handbag rival that's sporting some serious growth these days. Coach's weakness at a time of upper class prosperity is troubling.
3. Don't drink and SkyDrive
If you've warmed up to Microsoft's SkyDrive, prepare to experience the cloud-base file storage platform under a new moniker.
Microsoft came up short in its legal tussle with Britain's BSkyB over using the Sky name. Microsoft won't appeal the trademark battle that it lost on Wednesday, and will be allotted a reasonable amount of time to rebrand its service.
Terms beyond that -- including financial considerations -- were not disclosed, but one would think that Microsoft would have thought this through before a worldwide service launch. There's no indication as to what Microsoft will rename the service, but here's some free legal advice for Mr. Softy: Dropbox is already taken.
4. 4 sight
American Homes 4 Rent went public on Thursday. It's the second largest player in the market of companies that buy distressed properties, spruce them up, and rent them out.
This is the third company with this model to go public in the past eight months, and it's probably not a good sign that the first two fell below their original IPO prices. It wasn't a shock to see American Homes 4 Rent price at the low end of its expected range when it hit the market at $16.
Why is this debutante making the cut? Well, American Homes 4 Rent does have seasoned management, but it just got into this business two years ago. Do you remember the housing market two years ago? There were a lot of bargains to be had. It's a different story now as home prices have risen dramatically. Two years ago, it was easy to find find properties trading below replacement cost, something that American Homes 4 Rent mentions several times in its prospectus.
Raising money now won't buy the same kind of deals it got when it started.
It wasn't a surprise to see the stock close its first day of trading yesterday at $15.60, below its IPO price.
5. Penney for your thoughts
Shares of JCPenney tumbled during the last hour of trading on Wednesday after a New York Post article claimed that commercial-lending giant CIT had scaled back deliveries from the smaller supplier on credit risk concerns.
It's easy to see why this could be problematic. JCPenney refuted the claims, arguing that it has ample liquidity and "the support of all of its key vendors."
The Postdidn't back down, calling it a "non-denial denial," because JCPenney only addressed key vendors and not the small suppliers that the report was alluding to originally.
It's a messy situation, even if the story doesn't hold up. Some analysts aren't taking any chances. Citi downgraded the troubled retailer on Thursday, slashing its price target from $20, to $11.
Make smart moves now
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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 recommends Coach. The Motley Fool owns shares of Coach and 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.
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