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:
CAPS Rating (out of 5)
Previous or Consensus Estimate
|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.
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.
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.