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. Daily deals are peaking
Shares of Groupon (Nasdaq: GRPN  ) tumbled to fresh lows this week after the daily deals leader offered up uninspiring quarterly results.

Revenue may have climbed 45% to $568.3 million over the past year, but that's actually a sequential increase of less than 2%. When you back out Groupon's direct revenue -- the gross bookings being recorded on Groupon Goods merchandise that the company is taking in -- revenue actually declined 7% sequentially.

It's safe to say that Groupon has a credibility problem with investors. The stock has shed roughly two-thirds of its value since going public late last year at $20. However, with signs pointing to a model itself that may be peaking, Groupon apparently also has a credibility problem with consumers.

2. Good luck with that, RIM
Research In Motion (Nasdaq: RIMM  ) is so confident about its prospects for its upcoming BB10 operating system update that it's exploring the possibility of licensing the BlackBerry platform to other manufacturers.

Even given away -- in the mold of Android -- it's hard to fathom too many takers. As great as the upgrade may be, Android and iOS have 83% of the smartphone market cornered. RIM has seen its market share cut roughly in half over the past year, and this isn't a market where momentum bounces back.

There may be licensing opportunities outside of smartphones and tablets. RIM has had some degree of success in licensing the QNX platform that BB10 is based on across unrelated industries in the past. RIM still faces an uphill battle in a marketplace where the malleable open-source operating system of choice -- Android -- is running away with the market.

3. Even the cheapskates are staying away
GameStop (NYSE: GME  ) has a popularity problem.

The leading video game retailer cranked out weak quarterly results yesterday. Sales fell 11% as comps tanked, and net income plunged 32%.

However, the scary thing here is that pre-owned sales actually fell by 11% during the quarter. This has been the company's recession-proof niche, bucking the malaise of the industry that has seen the physical sale of hardware and software crater over the past three years.

It's understandable if a lack of software releases puts a damper on the sale of shrink-wrapped games and gear, but if even the penny-pinchers aren't coming around to buy secondhand games, the GameStop model's in for a world of hurt.

GameStop has been lousy at assessing the demise of its business. Just five months ago the company was calling for comps this year to climb by 1% to 5%. Two downward revisions later, the chain is eyeing comps to fall by 2% to 10% for all of 2012.

4. It asked for my PIN, but it's holding a grenade pin
If there's a company out there that should know a thing or two about shady transactions it would be NCR (NYSE: NCR  ) . The company makes ATMs!

However, NCR shares got slammed this week on allegations that it has violated U.S. sanction and anti-bribery laws overseas.

Reports detailing investigations into NCR's actions in China and the Middle East may eventually hurt the company's bottom line, but right away it dings the company's credibility.

5. Rare earth indeed
Molycorp
(NYSE: MCP  ) turned heads yesterday after proposing offerings of $300 million in convertible senior notes and $150 million in stock.

Really? The rare-earth minerals specialist is trading at a fifth of its 52-week high! Is now really the best time to begin printing new shares in a secondary stock offering?

Hindsight is painful exercise. It's not as if Molycorp knew that its stock would crater 80%, or else it could've pulled off its stock offering closer to its highs. However, it's just adding insult to injury to give the senior notes a dilutive convertible element.

Ouch.

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The Motley Fool owns shares of GameStop. Motley Fool newsletter services have recommended creating a modified stock repair position in GameStop. 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 17, 2012, at 10:45 AM, campinas28 wrote:

    Re: GME Increased their dividend, insiders are buying. Low beta, PE, and PEG. May turn around, may not. Teenage gamers most likely will keep buying, funded by their over indulgent parents. Barron's informative article may have helped. Shorts covering. Oh yeah, take a look at stock performance since 8/15/2012 earnings release. Purchased at $17.11 on 8/14/2012, so far not dumb. Will have too see.

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Related Tickers

7/29/2014 11:14 AM
BBRY $9.84 Down -0.11 -1.11%
BlackBerry CAPS Rating: *
GME $46.32 Up +0.24 +0.52%
GameStop CAPS Rating: *
GRPN $6.25 Down -0.14 -2.19%
Groupon, Inc. CAPS Rating: *
MCP $2.10 Down -0.03 -1.18%
Molycorp, Inc. CAPS Rating: **
NCR $31.17 Down -0.15 -0.48%
NCR Corp CAPS Rating: ****

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