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 first cut is always the deepest
The prognosis wasn't favorable for Intuitive Surgical this week, as its shares tumbled 16% on Tuesday after lowering its sales estimates.
The company behind the da Vinci robotic arm surgical system warned that revenue during the second quarter came in at roughly $575 million, well below the $630 million that analysts were forecasting. The math here is made more cruel because $575 million implies just 7% in year-over-year growth.
Intuitive Surgical has carried a lofty earnings multiple in the past because of its healthy double-digit percentage growth. Clearly, 7% isn't going to cut it, and the 3% projected pop in profitability isn't helping.
Making matters worse, Intuitive Surgical is targeting a year-over-year drop in sales of the actual surgical systems.
Canaccord Genuity and Lazard Capital slashed their price targets on the fallen medical products darling, and JMP Securities and Goldman Sachs joined Canaccord Genuity in downgrading the stock's rating.
2. Sam Walton is a marked man
If you're hankering for a tasty conversation starter, bring up the Large Retailer Accountability Act of 2013 that was passed by the D.C. City Council this week.
Wal-Mart got whacked by the move that demands retailers making more than $1 billion and opening stores larger than 75,000 square feet to pay a minimum wage that is 50% higher than the rest of the city's retailers.
It was clearly a lob at Wal-Mart, which was in the process of constructing three locations and planning to open three more in the area. It may as well be called the Wal-Mart Accountability Act, because other large chains that already have a presence in the city will have four years before joining Wal-Mart with a minimum wage floor of $12.50 an hour instead of $8.25 an hour.
There's also a pro-labor stipulation that would free a large retailer from the new rule if it operates with unionized labor.
It's going to be controversial, and, naturally, you're probably set on loving this or hating this depending on where you stand politically, and how you feel about the world's largest retailer. However, Wal-Mart got duped here. It has called off plans for the three stores that were in the works, but now it has to decide the fate of the three stores that are currently being built.
3. Get busy with the fizzy
Is SodaStream really up for sale?
The New York Post is reporting that SodaStream has been quietly trying to sell itself for at least three weeks, but sources say that any interest in acquiring the company behind the system that turns flat water into carbonated soda is starting to fizzle out.
It's easy to picture SodaStream eyeing an exit strategy if it was trading at a ridiculous valuation, or if growth was starting to stall, but that's just not the case here. SodaStream is trading for just 19 times forward earnings, even though it's currently growing at a faster clip.
Sodastream is still a disruptor, something that it deliciously plays up in its ads.
If SodaStream is really up for sale, it's a dumb move.
If SodaStream isn't really up for sale, it's a dumb rumor.
4. Mac attack
The PC market is getting ugly.
Industry trackers Gartner and IDC both reported this week that PC shipments fell by roughly 11% during the second quarter relative to the prior year.
The news is worse for Apple , which is the only one of the four largest PC companies in this country to see its domestic market share decline. Losing share in a shrinking pie isn't a good place to be.
The silver lining here is that Apple isn't trading on the merits of its original computer business these days. Currently, iPhones and iPads are the real growth drivers at the tech bellwether. However, with margins in those businesses starting to slip, it would've been nice to have Macs to fall back on.
5. Panned aura
Pandora ended a blistering rally that saw the shares move higher in 10 of 11 trading days by announcing disappointing metrics for the month of June.
Listener hours at the country's leading music streaming service fell from 1.35 billion in May, to just 1.25 billion in June. There is a seasonal slowdown in the summertime, but it's never been this bad. Pandora's share of the total U.S. radio listening market shrank from 7.29% in May, to 7.04% in June, pointing to a bigger problem in popularity than the summertime swoon.
Pandora's move to cap mobile usage for free customers may be taking its toll, but it's now proving to be a risky gamble, with tech giants introducing new offerings this year.
With so much of the financial industry getting bad press these days, it may be a greedy-when-others-are-fearful moment. Not surprisingly, some of Warren Buffett's biggest investments are in the space. In the Motley Fool's free report, The Stocks Only the Smartest Investors Are Buying, you can learn about a small, under-the-radar bank that's too tiny for Buffett's billions. Too bad, because it has better operating metrics than his favorites. Just click here to keep reading.
The article This Week's 5 Dumbest Stock Moves originally appeared on Fool.com.Longtime Fool contributor Rick Munarriz owns shares of SodaStream. The Motley Fool recommends Apple, Intuitive Surgical, Pandora Media, and SodaStream. The Motley Fool owns shares of Apple, Intuitive Surgical, and SodaStream. 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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