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. Bad to the Baidu
Decelerating growth is part of the life cycle as growth stocks become blue chips, but it's not a good sign when analysts who couldn't keep up with a company on the way up can't lower their targets fast enough on the way down.

Baidu (Nasdaq: BIDU  ) posted disappointing quarterly results on Monday.

Revenue climbed 50% to $994.6 million in the latest quarter for China's leading search engine. That may not sound too bad, but it's actually the slowest year-over-year growth that Baidu has posted in years. Making matters worse, analysts were betting on a 53% surge in revenue.

It gets worse. Baidu now sees fourth-quarter revenue growing at a 38% to 42% clip relative to last year's fourth quarter. Not only would this be a sequential decline, but Wall Street was holding out for top-line growth decelerating for a 46% advance.

Baidu didn't do itself any favors in the call by pointing to the big but as-yet-unrealized potential of mobile, failing to single out the growing popularity in China of Qihoo 360's (NYSE: QIHU  ) new search engine, and suggesting that margin-gnawing investments to beef up mobile and cloud services are on the way.

2. Under the Micro scope
Plenty of companies have been coming up short this earnings season, but then there are a few that aren't even close.

MicroStrategy (Nasdaq: MSTR  ) posted problematic quarterly results on Monday.

The provider of business intelligence software solutions posted a profit of $0.43 a share on $143.2 million in revenue, essentially flat from where it was a year earlier. The rub is that analysts were banking on net income of $0.84 a share on a little more than $150 million in revenue.

Bulls will argue that the miss isn't MicroStrategy's fault. It doesn't provide guidance. It didn't even schedule a conference call to discuss the results. Maybe it's just me, but shouldn't a company whose product turns a client's operational data into actionable information be a little more forthcoming with information of its own?

3. Transitions in motion
"We are undergoing a transition phase in the Company's evolution," begins a quote from OCZ Technology's (Nasdaq: OCZ  ) CEO in a press release that went out on Wednesday.

At that point, you really don't need to keep reading. The term "transition phase" is what somebody might say just as they're about to break up with you, and in this case it's pretty much the same thing.

OCZ -- a company that is still weeks behind in filing its latest quarterly financials -- is a mess right now. The maker of solid-state drives will be discontinuing many of its products and slashing its global workforce by 28%.

Don't take it personally, OCZ bulls. It's not you. It's OCZ.

4. Vringo was the funny-looking Beatle
Shares of Vringo (NYSEMKT: VRNG  ) plunged 36% on Wednesday -- with several trading halts along the way -- after a district court judge limited the company's potential damages in its patent infringement suit against several search engines and online retailers.

Instead of potentially claiming damages dating all the way back to the summer of 2005, the judge ruled that Vringo can only sue for damages incurred since Sep. 15, 2011.

It's at this point where a little color is in order. Vringo bought these patents in a small eight-figure transaction earlier this year. However, it was hoping to turn around and claim at least $500 million in damages. The patents -- old Lycos claims dealing with the way that ads are targeted based on search histories -- may very well be valuable, but was it realistic to expect such a big return on these patents?

After all, couldn't the companies being sued have outbid Vringo at the time?

5. Radio silence
Sirius XM Radio (Nasdaq: SIRI  ) served up a strong quarterly report on Thursday morning.

The satellite radio provider is growing at a healthy clip, and the market responded by sending the stock slightly higher on the news.

Why is Sirius XM on the "dumb" list this week, then? Well, this verdict goes out to the analysts participating in the call.

Karmazin didn't address his recent resignation that will go into effect in three months, and not a single analyst asked for some more color on the decision or perspective on how the CEO search is going.

Average revenue per user is at an all-time high and the company closed out the period with a better-than-expected subscriber count. However, Sirius XM chose to reiterate its revenue, cash flow, and adjusted EBITDA guidance metrics. Shouldn't an analyst have called Sirius XM out on that?

Even though Liberty Media (Nasdaq: LMCA  ) is closing in on a majority stake in the company, not a single analyst mentioned the company. It's as if John Malone is Voldemort from the Harry Potter series.

Wake up, Wall Street. Ask the questions that investors would like to see answered.

Get smart
Despite Sirius XM being one of the market's biggest winners since bottoming out three years ago, there is still some healthy upside to be had if things go right for it -- and plenty of room for it to fall if things don't. Read all about Sirius in our brand new premium report. To get started, just click here now.

Longtime Fool contributor Rick Aristotle Munarriz owns shares of Liberty Media. The Motley Fool owns shares of Baidu. Motley Fool newsletter services recommend Baidu. 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 (5)

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 November 02, 2012, at 10:43 AM, StockMarketStud wrote:

    The indians bought Manhatten for $24. If it was worth anymore somebody would have paid more. Dah

  • Report this Comment On November 02, 2012, at 11:11 AM, JamesRobertDobbs wrote:

    I didn't listen to the Sirius Q3 call, but my understanding is that at the end there was a short Q&A session and then kind of an abrupt "thank you", "good bye", *click* which took people by surprise. I'm wondering if analysts thought they'd have more time for questions than they did.

  • Report this Comment On November 02, 2012, at 11:46 AM, rsinj wrote:

    Stud - Manhattan (notice correct spelling) was SOLD by the Indians for $24 (and that amount is debatable).

    Regardless, the point made by the court is clear - you can purchase lottery tickets (even expensive ones) if you like, but your chances of winning are still astronomically against you. So don't cry when you lose your money.

    The entire VRNG affair is laughable when you get down to it. You have jokers like Altucher making pontifications about legal issues. I remember his articles very well - his simple argument "go read the lawsuit" and his ridiculous valuation. Well, it conned lots of simpletons who think they are investors to buy the lottery ticket. Just look where the stock and market cap is today - $2.50/share or $90 million cap - and $45 million of that is from a share offering done a few weeks ago when the shares were pushed to new unrealistic highs...while insiders were selling. I haven't seen anything from Altucher on VRNG lately - what a surprise.

  • Report this Comment On November 02, 2012, at 1:40 PM, Lamley2 wrote:

    Mel may well be planning to chill with his new nest egg, which he deserves in my opinion. He's done a great job.

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