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This Week's 5 Dumbest Stock Moves

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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. Smells like teen Spirit
It was a close presidential election, but if we have to declare a loser this week it may as well be Spirit Airlines (Nasdaq: SAVE  ) .

The discount air carrier is known for its low rates and ridiculous surcharges. Even a carry-on bag gets slapped a fee on Spirit.

However, the fast-growing airline is also known for its edgy advertising. It may have flown too close to the sun on Tuesday when it pushed out a promotional email with a "Romney Wins!" subject line.

It wasn't a "Dewey Wins" flub. The marketing message was intentional, going out well before the official election results were tallied. The magnetic email goes on to read, "Romney Wins. And So Do Obama and You With These Incredibly Low Fares."

The misleading missive then goes on to promote a fare sale with one-way flights starting at $29.80.

Naturally, many recipients didn't appreciate the preying-on-emotions marketing approach. You can imagine a lot of Spirit customers unsubscribing from the marketing list after that stunt.

2. You should've booked this flight earlier
There's some serious consolidation taking place among the travel portals, as (Nasdaq: PCLN  ) revealed on Thursday night that it will be acquiring Kayak Software (Nasdaq: KYAK  ) .

The logic behind the $1.8 billion purchase is sound. Kayak runs a popular platform for travelers to scour several websites and service providers for cheap flights, hotels, and rental cars at the same time. Priceline was starting to rely too much on European bookings at a time when that particular region hasn't bounced back.

However, the deal makes the cut this week because of the price and timing of the deal. Kayak went public at $26 this summer, and now Priceline is set to take the company out at $40 a share. Couldn't Priceline had tried harder to snap up the company before it went public? Kayak's path to going public wasn't exactly smooth, so surely there could have been some opportunities for Priceline to pick it up for less than it's shelling out now.

3. Groupon isn't good beyond the goods
Groupon (Nasdaq: GRPN  ) bulls may be in denial, but it's at least denial at a cut-rate price.

The daily-deals leader is taking another pounding after posting another disappointing quarterly report last night.

Revenue rose 32% and an operating loss was transformed into an operating profit, but the numbers aren't pretty once you start digging.

Groupon Goods -- a low-margin initiative that Groupon started late last year to sell physical goods directly to its customers -- is the only thing making this a growth story. Back out direct revenue, and Groupon's year-over-year growth clocked in a mere 0.1% higher. On a sequential basis we're looking at a 16% slide.


I did mention the low-margin nature of Groupon Goods, right?

4. The Hamburglar made me do it
Consumers have finally had enough of McDonald's (NYSE: MCD  ) .

For the first time since 2003, the world's largest restaurant chain posted a decline in worldwide comps for the month of October. Global comps fell 1.8% last month, and it was a scarier 2.2% dip in domestic same-store sales.

Investors probably should have seen this coming. Mickey D's just got too greedy.

The move to upgrade its menu with premium offerings -- from chicken salads to barista-concocted coffee beverages -- seemed smart as long as the company kept its Dollar Menu intact for its loyal penny-pinchers. However, as items on the buck menu began levitating in price up to the Extra Value Menu, the barbell pricing approach of hitting potential diners at both ends of the pricing spectrum erupted.

McDonald's said on Thursday that it will focus again on its Dollar Menu. I guess you can say the buck stops here.

5. Zillow talk
Like a house with a sinkhole unearthed in the front porch, Zillow (Nasdaq: Z  ) saw its value take a hit this week after an unwelcome cliff.

The online provider of real estate information may have posted reasonable quarterly results, but its guidance -- calling for a sequential dip in revenue and a sharp sequential plunge in adjusted EBITDA -- was a disappointment.

Then again, it may also be fair to call its most recent quarter a bit of a letdown. Zillow earned at least twice as much as Wall Street was forecasting in each of its three previous quarters, so merely matching Wall Street's bottom line estimate this time around is a bummer for spoiled bulls.

There goes the neighborhood.

Get smart
After making investors rich in 2011, McDonald's has been one of the worst-performing blue chip stocks this year. Our top analyst on the company will tell you whether you should be worried by this trend, and he'll shed light on whether McDonald's is a buy at today's prices. Click here now to read our premium research report on the company.


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10/25/2016 1:38 PM
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