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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. Zynga needs a new game face
Social gaming is a popularity contest, and Zynga (NASDAQ: ZNGA  ) isn't winning.

Shares of the top dog in social gaming slipped 7% on Thursday after delivering dreadful guidance.

The most recent quarter itself wasn't all that inspiring with an 18% decline in revenue. Zynga surprised the market with a small profit -- analysts were bracing for a deficit -- but the real problem is that bookings continue to shrink.

Zynga sees $225 million to $235 million in revenue for the current quarter, and that's well below the $263.6 million it just rang up, the $301.6 million it delivered a year earlier and the $261.7 million that Wall Street was settling for this time around.

Weren't new games and the new real money gambling initiative overseas supposed to turn things around? This game isn't getting any prettier.

2. Baidu and Zynga sitting in a tree, M-I-S-S-I-N-G
Baidu (NASDAQ: BIDU  ) also fell after disappointing investors with its quarterly report this week, but we're not going there here.

A prankster posted a bogus press release on a website that offers free submissions, claiming that Baidu would be buying Zynga for $10 a share.

It may not be a totally outlandish idea for Baidu to snap up Zynga as a way to bone up on both mobile and have some more skin internationally, but did anyone really believe this? Some people did because Zynga's stock initially moved higher on the fake news.

Why would any company pay three times what Zynga's worth in a buyout? Since Zynga is trading close to its cash value, a buyout at its IPO price of $10 would actually be a lot more than three times its current valuation on an enterprise value basis.

3. House dressing
There are a few indications that we're in a housing bubble again, but at least one homebuilder is already falling back to Earth.

NVR (NYSE: NVR  ) posted strong financials but fell woefully short of expectations.

The residential property developer's revenue climbed 28% to $770.3 million and earnings rose 75% to $6.84 a share. This may look snazzy, but Wall Street was betting on a profit of $8.05 a share on $840.9 million in revenue.


It also has to be problematic to see the order cancellation rate of 13.2%. That's quite a bit higher than the 10.3% rate during the prior year's quarter.

4. Apples attract worms
(NASDAQ: AAPL  ) managed to surpass watered-down expectations for its latest quarter, but then it pulled the rug from investors with brutally disappointing guidance.

As if the lack of new product announcements in recent months wasn't bad enough, now investors are knee-deep in a quarter of flat top-line growth with a sharp decline in profitability.

Apple posted its first year-over-year decline in profitability since 2003 this week, but the current quarter is even scarier.

The faltering consumer tech giant is eyeing $33.5 billion to $35.5 billion in revenue for the new fiscal third quarter, implying a small dip on the top line at the midpoint. The real horror show here is how contracting margins are eroding earnings growth. Apple's margin and revenue guidance implies that earnings will be in the ballpark of $7 a share, embarrassingly short of both the $9.08 a share Wall Street thought it would crank out and the $9.32-a-share profit it served up a year earlier.

5. Frank LINN
LINN Energy (NASDAQOTH: LINEQ  ) didn't get the job done this quarter.

Revenue and earnings fell short of Wall Street expectations for the independent oil and natural gas developer. LINN's adjusted earnings of $0.16 a share were well shy of the $0.24 a share that analysts were targeting.

LINN also fell short of its production guidance. Weather issues caused shut-ins and drilling delays, leading to a daily average of just 796 million cubic feet, below its original production target of 810 million to 845 million cubic feet.

Get smart
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Read/Post Comments (5) | Recommend This Article (0)

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 April 26, 2013, at 4:24 PM, MrMainStreet wrote:

    There are some worthy names on this list, but I believe there is a key stock missing.

    $NFLX enjoyed impressive gains this week, but the stock is OVERVALUED. Here is an interesting take on Netflix:

  • Report this Comment On April 27, 2013, at 4:45 PM, mdl00 wrote:

    Don't know what you're squawking about in regards to Apple.

  • Report this Comment On April 27, 2013, at 8:11 PM, MAS88 wrote:

    Wow in regards to Zynga you people really don't let up do you? It's funny how you report that ZNGA's share price dropped 7% on Thursday, but nowhere do you say that the very next day it bounced back up to the same level as Wednesday's close (I mean it's Saturday today). Not to mention the fact that Zynga specifically said they were not including whatever revenue new games in Q2 such as Draw Something 2 will bring in (it's currently number 1 in case you were wondering). And they also specifically said the online gambling in the UK is a trial run and it started in Q2 not Q1 so why the heck are you saying such ignorant remarks like "weren't the gambling initiatives supposed to turn things around". So which is it - do you not know what you're talking about, or do you have an agenda? But hey why would you guys actually report all of the information when you clearly have an agenda? I don't expect you to actually post this, but just read it and know that there are alot of people out there who find this game of yours pathetic.

  • Report this Comment On April 27, 2013, at 10:42 PM, dachman wrote:

    I agree woleheartily with your comment MAS88 they do seem to have an agenda they're probably short with this shortsighted article

  • Report this Comment On April 28, 2013, at 12:38 PM, milillo99 wrote:

    Spot on MAS88. Next quarter when Draw Something 2 hits the books we should be in for a treat and the gambling income will start to increase quarter over quarter for some time.

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