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 we do every week, let's take a look at five dumb financial events this week that may make your head spin.

1. Maybe you're not so ubiquitous
Shares of Ubiquiti Networks (Nasdaq: UBNT  ) are getting pounded today after the company posted shocking guidance for the current quarter.

There was nothing seemingly wrong about the quarter that just ended. Revenue soared 40% to $94.9 million, and the tech company's adjusted profit of $0.30 a share was just ahead of where analysts were perched.

The problem comes in Ubiquiti's outlook.

"The Ubiquiti brand is dominant in our markets and demand for our technology is stronger than ever," CEO Robert Pera notes in last night's release.

Really?

Ubiquiti expects to earn just $0.14 a share to $0.17 a share on no more than $70 million in revenue for the current quarter. It's a sharp sequential drop.

Pera points the finger at terminated distributors that are now selling counterfeit versions of the company's marquee AirMax product. Ubiquiti is going after the renegade copycats, but it sees the situation impacting results for the next two quarters.

2. Monsters are real
Energy drinks continue to be popular, but perhaps they're just not popular enough.

Monster Beverage (Nasdaq: MNST  ) took a hit after posting disappointing quarterly results on Wednesday night. Sure, it's hard to call a 28% pop in net sales and a 30% spike in profitability "disappointing," but Wall Street was holding out for just a little bit more.

When you're a growth stock, there's little margin for error. The company's Monster energy drink may be second only to Red Bull in popularity, but the market expects nothing but the best when you're trading at more than 30 times this year's projected earnings.

3. Amazon gets into the game 
In a somewhat surprising move, Amazon.com (Nasdaq: AMZN  ) has thrown its hat into the social gaming ring.

The leading online retailer introduced Living Classics, a moving objects game where players scour busy pictures within classic storybook settings to find things that are animated.

It may seem like a good idea -- and the tie-in to Amazon's literary roots is a nice touch -- but what's Amazon doing in a crowded niche? Perhaps more importantly, Amazon seems to have a thriving business selling digital games. How will developers feel now that there's a conflict of interest?

After several days of media publicity and hype, the game only had 30,000 players as of last night. That's a far cry from the tens of millions of players that the genre's top games are attracting.

4. Water, water everywhere
Primo Water's (Nasdaq: PRMW  ) stock tumbled 21% on Wednesday after the distributor of water in three- and five-gallon jugs posted another quarterly loss and revealed that it would be taking a step back from its once promising soda-maker appliance business.

The writing was probably on the wall for Flavorstation. Its release was delayed last year as the company had to reformulate the soda flavors. It failed to gain meaningful retail distribution this year.

Primo Water will go back to focusing on its steadier water and dispenser businesses as it seeks out strategic alternatives for Flavorstation.

It hopes to either strike licensing partnerships or find buyers for the assets, but neither scenario is likely. There's a reason why it took a hit during the quarter to write down its acquisition. Sometimes fizzy dreams go flat.

5. No thank queue
Shares of Best Buy (NYSE: BBY  ) popped 22% higher to open at $21.60 on Monday after dethroned founder Richard Schulze sent a letter to the retailer's board requesting permission to explore a buyout of the company.

He would be looking to pay between $24 and $26 a share for the struggling retailer, but investors know better than that. There's a reason the stock peaked at the open, proceeding to close lower every subsequent day this week.

Schulze can't buy the company on his own, and private-equity funds will likely balk once they begin their due diligence. There's also the matter of board approval. Shareholders may be taking pitchforks to the next annual meeting, but the company's pride will probably get in the way of accepting a reasonable buyout bid.

Just as a footnote to history, Circuit City rebuffed a couple of buyout bids on the way to zero.

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The Motley Fool owns shares of Amazon.com and Best Buy. Motley Fool newsletter services have recommended buying shares of Monster Beverage and Amazon.com. 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. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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  • Report this Comment On August 10, 2012, at 11:35 AM, MrViklund wrote:

    About Monster Beverage, like with Apple. It's funny when analysts and investors get disappointing buy their own expectations.

    Sad about Ubiquiti Networks. I have been following this company for a while and I think it's a highly interesting company. Just sad with all the noise lately. Not long ago it was the rumored "SEC-investigation", and now this. I will probably buy a little today and add to it as times goes by. I still believe in the company.

  • Report this Comment On August 10, 2012, at 11:37 AM, MrViklund wrote:

    And I'm still have a small position in Primo Water. They have had some timing issues for sure and the expectations were maybe set too high but I think this company has staying power.

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