Stocks That Just Lowered the Boom

When a company forecasts lower sales or profits, its stock usually takes a hit. It's not always easy to tell whether your company is having a fire sale or it's burning down. Maybe it's time to get out -- or maybe it's time to buy more!

To help tell the difference, we pair up the dour guidance news with the sentiments of more than 180,000 members of Motley Fool CAPS. If the best stock pickers think the companies still have the power to turn lemons into lemonade, maybe investors should take notice.

Here are two stocks that have recently announced reduced guidance:

Stock

CAPS Rating (out of 5)

Previous or Consensus Estimate

Current Guidance

Period

Activision Blizzard (Nasdaq: ATVI  ) **** $0.96 $0.94 FY 12
Green Mountain Coffee Roasters (Nasdaq: GMCR  ) * $0.72 $0.60-$0.65 Q2 12

Don't blindly sell into their bearish outlook -- you still need to do some research. Use the announcement as a jumping off point for additional research.

Game on!
Although game maker Activision Blizzard was able to slow the loss of players from its World of Warcraft franchise, losing only 100,000 subscribers (compared to 700,000 the quarter before), the game is long in the tooth and there are new upstarts that are stealing the attention -- and dollars -- of gamers.

My daughter was a diehard WoW fanatic who has since migrated to ZeniMax Media's Skyrim. Analysts think Electronic Arts (Nasdaq: EA  ) Star Wars: The Old Republic will also chip away further at the game's base. Yet the softness experienced by Activision is indicative of a slump hitting the whole industry. According to the market researchers at NPD, video game sales tumbled 34% in January from the year-ago period.

Despite the lower guidance, Activision has beaten analyst expectations before, and has initiated a big $1 billion share-buyback program. It also has a hit on its hand with Skylanders, a game and toy brand, which management said could be its next $1 billion brand, and Diablo III will be coming out after the first quarter, which just might be enough to woo my daughter back into the Activision fold. And let's not forget the Call of Duty franchise, even if analysts think the game maker is resting too heavily on those laurels.

CAPS member roshmaster believes the new game introductions will firm up any softness the market may be seeing.

Blizzard is getting ready to release a game that has been in the making for 10 years, Diablo III. With this release, the game will include a "real money auction house" (RMAH), which will provide a new way of making money off of a game. They sold over 10 million copies of Diablo II, and with Diablo III being released for consoles on top of PCs, it will be a huge success.

Add Activision to your Watchlist, then tell me in the comments section below or on the Activision Blizzard CAPS page if you think it's still got game.

No green thumb
Apparently you can't put a price on convenience. A recent New York Times article highlighted the absurd cost of coffee by making it one cup at a time through K-Cups for use in Green Mountain Coffee Roasters' Keurig machines. Some consumers are paying the equivalent of $50 a pound for their coffee if they're buying JM Smucker's (NYSE: SJM  ) Folger's or Nestle's Nespresso brand. And to think, people (me) huff about the "outrageous" price of Starbucks (Nasdaq: SBUX  ) coffee! At under $13 a pound, the Seattle brewer is downright thrifty in comparison.

Although a number of companies are charging champagne prices for their swill, the party is going to come to an end later this year, when generic K-Cups hit the market. The K-Cup is popular now because it's protected by patents, but while coffee drinkers may be willing to pay up for convenience now, there will be no need to pay a premium when they can get the same convenience for less.

My underperform rating on Green Mountain is languishing at the moment, but I still believe it will play out in the end and so I will maintain my call on the coffee maker. Add its stock to the Fool's free portfolio tracker to see if generic K-Cups will brew up some controversy down the road.

Looking under rocks
These stocks may have lowered expectations, but The Motley Fool has identified three companies that are quietly cashing in on the explosion of smartphones and tablet PCs. You can get instant access to these companies by clicking here -- it's free! But only for a limited time, so hurry.

Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Starbucks and Activision Blizzard. The Fool owns shares of and has written calls on Activision Blizzard. Motley Fool newsletter services have recommended buying shares of Activision Blizzard, Green Mountain Coffee Roasters, and Starbucks; creating a lurking gator position in Green Mountain Coffee Roasters; and creating a synthetic long position in Activision Blizzard. 

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.


Read/Post Comments (6) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 10, 2012, at 6:08 PM, S0NAR wrote:

    There's no doubt Diablo III will be a huge success, but it won't be released until next quarter at the earliest. They've also hinted another highly anticipated title may hit the shelves this year, which could only be 'Starcraft II: Heart of the Swarm' the second chapter of three.

    In the gaming universe, [Activision] Blizzard's only true competition is itself, which is why they are constantly able to get away with pushing back their release dates as they fine tune each game. WoW's periodic expansion packs will keep a decent revenue stream coming in from monthly subscriptions, gradually losing steam to the likes of Skyrim and Star Wars this quarter, but when D3 finally drops you can count on them reclaiming a significant share of the market for the remainder of 2012.

    Disclosure - I don't play the sector, just the games.

  • Report this Comment On February 10, 2012, at 6:37 PM, lukem5 wrote:

    I have over 15 year of experience as an end consumer of blizzards games. I can say that I am almost positive they will release D3 this summer or in the beginning of summer. If not it will be pushed back to holiday 2012/2013.

    I played D2 and I can say that this game has an ENORMOUS fan base that it has developed with d1/2 over the past 16 years or so and is sure to be a hit, and if blizzard gets all the gameplay mechanics right, it will continue to be a hit and the new auction house system will be their next cash cow.

    Gamers have been itching for a game like D3 that is sort of like a MMORPG but more RPG than MMO, there hasn't been a game to date that has been anything like D2/D1.

    The PvP characteristics are what really made this game amazing in its heyday, but can it be replicated to match up against new modern gameplay PvP? Much has changed in the many years since d2 came out.

    I am waiting for a dip in this stock price and I will invest a good chunk of my money into it because this stock will be going past 20$ once all the old timers/serious traders realize how much profit these "little kid video game companies" actually make

  • Report this Comment On February 11, 2012, at 8:16 PM, steveat wrote:

    There is no doubt Blizzard has done a good job with their games which is why they are on top, but they have also treated their clients badly and since there is no central casual gaming body to govern, gaming companies can write whatever they was in their TOS and EULA. if you've ever read Blizzards, it's like "we are not responsible for anything"....and the proceeds to suggest that to receive compensation the issue must be deemed erroneous..and guess who's decision that is? No matter what happens, Blizzard is going to screw the customer. There is a function that has not worked for my character in over a year..do I get compensation, no. It is supposed to work, but it malfunctions all the time and has been reported and they know about it. It has so far taken 16 months and still not fixed. I asked for compensation...nothing. In fact, their support people are useless.

    Is this a one complaint kinda thing...no. Just read the boards. The reason why people are sticking with Blizz is that the mechanics are actually pretty good, but ..and it's a big BUT...when another game comes out with on par level of functionality such as PVP or PVE..watch Blizzard lose out BIG TIME. Players won't be coming back.

  • Report this Comment On February 12, 2012, at 1:52 AM, Raylanw wrote:

    On the contrary to your argument, computer gamers are probably the most demanding and high maintenance customers...anywhere. I speak as one myself. However, Blizzard's cult following may be a bit understated. I don't foresee any other developer that will garner fans in hoards like Blizzard. The closest to achieving this are Bioware and Bethesda (throw Ubi in there if you want, but I'll stick with my choices). Bioware is seemingly the biggest threat to Blizzard, but Activision gives more leash to Blizzard allowing for release date pushbacks and higher quality games whereas EA seems to push for release to quickly leading to an unpolished product. I speak purely in generalization for each company's reputation, but that's how gamers see it. In a roundabout way, I'm just saying that maybe demanding customers will leave Blizzard for slights here or there, but they almost certainly won't find a better developer out there.

    Long ATVI and EA (weird, huh?)

  • Report this Comment On February 12, 2012, at 7:13 AM, Madisonsmydog wrote:

    ATVI is a cash cow with the older titles mentioned above. You cannot simply keep releasing different versions of the same titles and expect the same results. I think that is the definition of insanity. However, with that said, I have to give a thumbs up to the Skylanders game. Granted the market is for the young audience and the story line is a simplified Zelda, but the idea is outstanding and is being marketed well.

    To play, you need to buy the starter set, which comes with three Skylanders. Those are then placed on a wireless portal and each Skylander stores its own information. Sure my kids love these three basic starters, but they find cool new characters they can use throughout the game. However, use those characters you need to buy a new figure. At $8 a piece, finding them is proving to be difficult. There are 32 in all. No I am not buying them all, but we now have two for each category each represent.

    So what does this $60 game cost us parents? Anywhere from $60 to be very basic, $180 for the mid range player and $300 for the 8 year old gamer. As a parent, AVTI, I send out a sarcastic thanks. As an investor, let me say, simply brilliant.

  • Report this Comment On February 14, 2012, at 9:31 AM, donzorco wrote:

    @ Madisonmydog:

    Well you even reference a company that has been doing just what you say is insane: Nintendo has been re-releasing the same games for a long time. The difference here and there is that once you've beaten Mario/Zelda/Metroid you're basically done. Starcraft/Diablo/Warcraft/CoD are all about changing worlds and/or competitive gameplay that lasts for months, even years.

    The landscape of gaming is changing. A few mainstay franchises are all you need if you can keep each one generating cash for years to come. Throw in the occasional Skylander's or Bungie game and you're in good shape.

    The games industry is in a tough spot right now. There is competition from other developers. But ATVI is making piles of cash, has no debt, pays a small (increasing) dividend, and has some of the best properties ever seen in gaming. This company will reward you... eventually.

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