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. BlackBerry picking season is over
The market usually rallies when a troubled company announces that it's hiring a pair of investment bankers for a "strategic review" that may include the eventual sale of the company.

Well, Research In Motion (Nasdaq: RIMM  ) tumbled 8% on Wednesday after doing exactly that. Sure, there was more to it than just that. The company also warned that it would be posting an operating loss for its May quarter. As bad as analysts have been on the BlackBerry parent lately, every single one of the 43 analysts following the company was eyeing a profit for the period.

RIM also confirmed the layoff rumors, conceding that there will be "significant spending reductions and headcount reductions in some areas" -- and that's something that sometimes moves broken stocks higher.

Well, investors have pretty much had enough. RIM should've sold itself years ago when it first began yielding market share to iPhones and Android smartphones. History doesn't show a lot of second chances there.

The company's sharp decline in market share will make it hard to smoke out any kind of buyer, knowing that the company will likely continue to shrink in relevance with every passing year.

2. Now you SINA -- now you don't
SINA (Nasdaq: SINA  ) is hoping that users of its popular SINA Weibo micro-blogging website can police themselves.

The Chinese dot-com darling is rolling out Weibo Credits, a point-based system where users that disseminate untrue information or harass other users will get docked points. Once a user's Weibo Credits drops below a certain level a "low credit" charm will be applied to the blogger's page. If the credit score falls all the way to zero, SINA will close the account.

This doesn't sound like the kind of hard-handed censorship that will go over well with users, but it seems as if SINA wants to be proactive here ahead of any regulatory decisions to curb free speech on the site.

Either way, the timing is lousy. SINA was promising that the site's first legitimate monetization efforts will be kicking in later this year. How tragic if traffic begins to slip just as the site is starting to make some serious money.

 3. This TiVo isn't a jet
It's been a rough month for TiVo (Nasdaq: TIVO  ) .

Early in May, the country's second-largest cable television provider introduced a premium-priced DVR that raised the bar on TiVo by eliminating TV ads.

On Wednesday, we got the company's latest quarterly report.

The numbers seem strong on the surface. TiVo's subscriber base has climbed 27% over the past year. Until recently, TiVo was actually shedding accounts. Revenue soared 40% to $54.5 million, and its deficit narrowed to $0.17 a share. Unfortunately, Wall Street was holding out for a loss of only $0.15 a share on $55.3 million in revenue.

TiVo's guidance for the new quarter is also problematic, with the DVR pioneer calling for a wider loss and lower revenue than what analysts were expecting.

4. Netflix's house of pain
Shares of Netflix (Nasdaq: NFLX  ) smacked a two-year low yesterday, after a bearish analyst note warned that the video service provider was in for "another year of pain."

Bank of America's Merrill Lynch feels that the company finds itself in a no-win scenario. Aggressive expansion overseas is generating losses in its streaming business. However, if Netflix decides to emphasize profit growth over expansion it would spook investors that see the retreat as a sign that its core business model is in trouble.

Gee, did anyone consider that Netflix may actually be expanding ambitiously internationally because it feels that there will ultimately be a lot of money to be made with its scalable business worldwide?

5. Cricket chirping
Leap Wireless
(Nasdaq: LEAP  ) will become the first domestic carrier to offer a pre-paid iPhone without a monthly contract.

This sounds like a great deal at first, and Leap's Cricket providing mobile plans for $55 a month is less than what the larger rivals are charging.

However, the problem with selling smartphones that don't have an annual contract is that there's no room for subsidization. Cricket users will have to drop $399 for the iPhone 4 and $499 for the entry-level iPhone 4S, $300 more than what these popular handsets sell for at the larger wireless carriers tethered to two-year contracts.

When you think about it, that's a lot of money for someone that is drawn to a month-by-month deal.

Get smart
Don't be a dumb investor. Check out the three stocks leading a new industrial revolution in this country. Sure, it's a free report. Check it out before it's gone.

The Motley Fool owns shares of Netflix and Bank of America. Motley Fool newsletter services have recommended buying shares of SINA and Netflix. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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


Read/Post Comments (3) | 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 June 01, 2012, at 1:03 PM, infektu wrote:

    If "every single one of the 43 analysts following the company (RIM) was eyeing a profit for the period" and most of then had "sell" ratings then something was rotten ...

    Frankly, if RIM gets to Sept.-Oct. (supposedly the target for the certification of the first BB10 handsests) with most of its 2bn cash blanket, then the world is theirs to conquer.

    Remeber when the rated RIM a buy at $140 in 2008 on sales which were a fraction of what they are today? Were they truly expecting that RIM were going to sell a BB to every man, woman and child on the planet? Just as close to (or far from) reality as today's "doom stories".

    I said I'll wait this out until August, but if they get more fearful, I'll start getting greedier...

  • Report this Comment On June 01, 2012, at 7:46 PM, ewakil12 wrote:

    @happypoordays +1000 What a great read!

  • Report this Comment On June 01, 2012, at 9:50 PM, mountain8 wrote:

    I understand we are the only country to force buyers to be stuck with a contract on cells. How are sales in other countries?

Add your comment.

DocumentId: 1900601, ~/Articles/ArticleHandler.aspx, 8/1/2014 2:49:50 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement