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 burning down. Maybe it is 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 our Motley Fool CAPS community of more than 180,000 members. 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

RF Micro Devices (Nasdaq: RFMD  ) **** $0.03 ($0.02) Q4 '11
Zipcar (Nasdaq: ZIP  ) *** ($0.07) ($0.10) - ($0.12) Q1 '12

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

Bad moon rising
Wireless chip maker RF Micro Devices' fourth-quarter growth is getting eclipsed by the Chinese lunar new year affecting order visibility, so it's forecasting greater-than-seasonal declines in sales to cellular handset manufacturers there. As China represents more than one-third of RF Micro's sales, it's going to experience a bulge in inventories just as sales are falling.

Triquint Semiconductor (Nasdaq: TQNT  ) also saw revenues fall in its quarter and offered up disappointing first-quarter guidance, though it didn't blame new year revelry.

The Fool's Anders Bylund sees emerging 4G opportunities as RF Micro's best chance for regaining momentum and market share, but it faces tough challenges from rivals like Skyworks Solutions. As a result, he dubs it a speculative, long-term play.

CAPS All-Star jlmjlm77 agrees that 4G is RF's ticket forward and 96% of the CAPS All-Stars rating the wireless chip maker would apparently agree as they've rated it to outperform the broad indexes. Add the wireless chip specialist to your watchlist, then tell me in the comments section below or on the RF Micro Devices CAPS page if you think the sun will rise again on the chip maker.

Zippity-do-dah
I'll admit to not understanding the investment thesis for Zipcar. When I can rent a car from Hertz (NYSE: HTZ  ) for the whole day for what it costs me to get one from Zipcar for an hour or two, I don't see the value proposition.

I've remarked to my colleague Alyce Lomax, who picked Zipcar for her Rising Star portfolio, that it might be my not living in an urban setting that blinds me to its attractive qualities. She notes that city dwellers can save $500 a month on the cost of owning a car and since it's a car sharing program rather than a rental service per se, it's a slightly different animal. Being able to pick up and go from wherever a Zipcar is parked on the street does offer some attractive differences to the whole paperwork rigmarole in renting a vehicle, even for a day.

Indeed, Hertz thought enough of Zipcar to start offering similar services. But to me that's only another argument against an investment here. Hertz has scale and reach beyond Zipcar's modest means, and though I wish Alyce well with her pick, I'm marking it to underperform on CAPS.

What about you? Does Zipcar have the ability to overcome significant financial hurdles in battling the car rental industry and does the concept have meaning for drivers beyond the confines of a city? Let us know on the Zipcar CAPS page and add its stock to the Fool's free portfolio tracker to see if it drives off the road or roars out onto the highway.

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 Hertz Global Holdings, TriQuint Semiconductor, and Zipcar. Motley Fool newsletter services have recommended buying shares of Zipcar. 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 (4) | 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 23, 2012, at 3:35 PM, dbtuner wrote:

    I'm with you on ZIP. Don't get it. Maybe at $3/sh

  • Report this Comment On February 23, 2012, at 3:39 PM, TMFGemHunter wrote:

    I've been a Zipcar member for over 4 years and I'm thinking about going long the stock at its current price. None of Zipcar's competitors have anywhere near the membership base of Zipcar. I think that counts a lot more than the total number of Hertz customers, for instance. Most people have no need for two car-sharing memberships, so if they've already signed up for Zipcar, they probably won't switch anytime soon.

    In my neighborhood, there is only one traditional car rental agency (Enterprise). Their daily rates are usually $40-$50 for a compact car including tax. If I need to do 3-4 hours worth of shopping, I can get a Zipcar for the same price or less, and I'm not responsible for gas or insurance.

    I've never rented a Zipcar for the day, so when I need that amount of time I usually go for a traditional car rental. But for a few hours at a time (errands, picking people up at the airport, etc.) it's a great value proposition. They have a lot of room to grow earnings as their established markets mature, even though revenue growth will probably slow down.

  • Report this Comment On February 23, 2012, at 4:07 PM, dbtuner wrote:

    ZIP might make a good usage case, but it is a poor investment by any metric.

  • Report this Comment On February 23, 2012, at 6:10 PM, bretco wrote:

    Yet another Foolish bomb ?

    Right up there with Krispy Kreme !

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