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 greatest flub of all
Last weekend's death of music icon Whitney Houston gave Sony (NYSE: SNE  ) yet another shot at this weekly list, potentially keeping its spot warm here for next week's launch of the overpriced PS Vita.

On Sunday, two of Houston's "best of" compilations were marked up dramatically on iTunes in Britain. The Ultimate Collection saw its price marked up a mindboggling 60%, going from $7.85 to about $12.50. The Greatest Hits was treated to a 25% increase from $12.50 to $15.67.

The move was only limited to Britain, but the opportunistic move came at a time when Houston's catalog was spiking as a result of her death.

Defenders of Sony's move will call it a case of supply and demand. Like Jeremy Lin rookie cards, events do trigger changes in value. Surely Houston items spiked in value on eBay after her death. However, we're talking digital distribution here. Supply is infinite.

More importantly, it took Sony two entire days of online outrage before responding to the matter. Sony now claims it was a mistake by a single employee. Really? Rogue traders at Sony? 

2. Your great-great-great grandfather is turning in his grave
Ancestry.com
(Nasdaq: ACOM  ) shares tumbled 16% yesterday after posting mixed results.

Weak guidance for the quarter and some problematic trends were more than enough to offset the leading genealogy website's feat of besting Wall Street's fourth-quarter targets on the top and bottom line.

Subscriber acquisition costs spiked sharply higher while average monthly revenue per subscriber inched sequentially lower. Paying more for customers who are paying less is an unwelcome sight though churn is thankfully inching lower after a recent pricing tweak that encourages long-term subscriptions.

The upside to the crummy report is that Ancestry.com is still growing and now fetching just 16 times this year's projected earnings and 13 times next year's bottom-line target.

3. Shorting with friends
Zynga's (Nasdaq: ZNGA  ) heady stock run since Facebook filed to go public came to at least a temporary pause after the social gaming giant posted its first quarterly report as a public company.

Despite reasonable growth in books and improvement in several key metrics, there is one area where Zynga is falling woefully short, and that's daily active users.

On a sequential basis, average daily active users have now declined for three consecutive quarters. Sure, monthly active users continue to climb nicely. How can it not? Zynga introduced a dozen new games through 2011. However, what's happening to the people that couldn't get enough of Zynga's casual games that they had to check in every day?

 

Average Daily Active Users

Q1 2011 62 million
Q2 2011 59 million
Q3 2011 54 million
Q4 2011 48 million

Source: Zynga filings.

Zynga was named after the founder's loyal bulldog, but daily active players are apparently not as faithful.

4. Wrong number
Vonage
(NYSE: VG  ) hung up on Mr. Market after missing Wall Street's profit forecast in its latest quarter.

Yes, Vonage is profitable -- and growing on the bottom line -- but flat revenue growth isn't going to woo too many growth stock investors.

Making matters worse, the Web-based phone service is looking to ramp up its spending in a move that will ding margins this year. Vonage is earmarking an additional $5 million to $10 million per quarter in expenses through 2012.

5. Black and Blue Nile
We're heart-deep in Blue Nile's (Nasdaq: NILE  ) peak season. The online high-end jeweler typically cleans house this time of year between holiday bling and Valentine's Day gifts. Well, we still don't know how the current quarter will play out, but it was a blue Christmas for Blue Nile.

The e-tailer fell woefully short of what the pros were expecting. Net sales declined 2% decline to $112.3 million. Analysts were banking on a $123.2 million on the top line. Blue Nile's profit of $0.30 a share wasn't even close to Wall Street's estimate of $0.42 a share.

It's at this point where some investors may be looking to call off their engagement with the stock, though Blue Nile's pricey shiny accessories will naturally begin selling again when the economy truly bounces back.

Get smart
Don't be a dumb investor. Check out the stocks that the smartest investors are buying. It's a free report. Check it out before it's gone.

Motley Fool newsletter services have recommended buying shares of Ancestry.com and Blue Nile. 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.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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

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 17, 2012, at 10:04 AM, vonhans22 wrote:

    It's hard to put your faith in this author, or in Motley Fool when just a week ago he was calling ACOM one of the 5 smartest moves of the week. I saw the drop coming, but was dumb like him (no offense). In fact, I take that back... We all miscalculate. Nonetheless, it's hard to put your faith in an investment organization when this happens.

  • Report this Comment On February 17, 2012, at 10:37 AM, vaderblue wrote:

    You should keep the score on stocks. I have never seen a stock I couldn't make some money on. Timing is all that matters and staying abreast

    of current events but playing a stock long is a different story and takes diligence and much homework and leave the analyst out when deciding. It's nice to have their blessings but you

    can make the decisiion yourself. 20/20 vision is hindsite. I can find an analyst telling us to sell Apple. Analyst are tools to be used. Consultants

    more or less when making a decision. I seen the best make mistakes. Motley's subscribers are very helpful on stock picking. Go with the consensus. Buy a stock you like. Remember I have my loses on good stocks. These are tough times and the world events makes it even more difficult not to mention the competition.

    NOT A PERFECT WORLD!

  • Report this Comment On February 17, 2012, at 11:16 AM, Demokrat wrote:

    Here is something else that is dumb. A finance writer not considering that Vonage's "lack of growth" did not prevent them from paying off more than half of their debt in less than a year from 225 million in november 2010 to 110 million today. Name me other companies that have been able to achieve such an exploit. Vonage is well aware of their strategy going forward. They know what markets need to be exploited. They are hard at work doing so ever since 2009 trying to tap into the long distance mobile plans. They have mentioned buying back shares. That would get some analysts drooling for shares of Vonage.

    Vonage has been consistently generating record earnings since early 2010. I sure would like you to explain to me how an analyst can expect Vonage to beat their own record earnings? Vonage managed 11cents eps for the last quarter and Motley Fool decided that their expectations would be.... 20cents?? Is that a means to downplay their achievement? What would lead you folks to project such a thing? I, a commoner, expected exactly what they reported. I saw no reason to do otherwise.

    Did you applaud Vonage when they decided they would advertise less, market less, reduce their workforce, in order to generate more cash from operations? I do not see that you could have. Especially today when you criticize them for wanting to increase their spending by an additional 5-10 M. Those spending cuts made it possible among other things for Vonage to reduce their debt by half and restructure the remaining debt at rather envious rates. But you probably already know all that. It seems that Vonage will always be out of favor with Motley Fool. That is biasness at its worst. Exploit all facets of Vonage policies to discredit them. I yearn for the day when an "analyst" will resign from Motley Fool and "tell all" about the policies of their employers there.

  • Report this Comment On February 18, 2012, at 4:32 PM, mfishb wrote:

    I would also take issue with including Blue Nile in this article of "dumb" moves. As the author himself implies, when the economy is bad luxury sales go down. Missing numbers with cause may mean thinking anew about a stock's value, but it has nothing to do with dumb moves.

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