Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
After a weak start to the holiday shopping season, investors are beginning to second-guess the health of the economy and the strength of the American consumer. That doubt is helping to push the major indexes lower today. As of 12:45 p.m. EST the Dow Jones Industrial Average (^DJI 0.40%) is down 109 points, or 0.69%, while the S&P 500 is off by 0.42% and the NASDAQ is down 0.31%.
So let's take a look at who is making waves within the consumer discretionary sector. Shares of Walt Disney (DIS -0.04%) are down 1.9% after the stock was downgraded from buy to neutral by research firm B. Riley on the basis of the stock's valuation. The firm feels that Disney is rather accurately priced and maintained its $73-per-share price target. Disney has certainly had a great year, with shares rising more than 40% since the start of 2013, but I believe this analyst is incorrect about the company's future. Disney has a number of great movies scheduled to be released in the next two years, and while the movie business only makes up around 10% of Disney's business, it drives toy sales and other revenue streams for the company. Investors should hold on to their shares at today's prices.
A few food stocks are also heading lower this morning. Yum! Brands (YUM 0.15%) is off by 2.3%, and Krispy Kreme Doughnuts (KKD) is down a whopping 18.4%. Yum's decline comes after the company reported disappointing same-store sales growth of 1% in China during November. The disappointment likely owes to the fact that the company aggressively ran promotions and offered deals during the first half of the month. Half-price chicken at KFC was a hit, but once those specials stopped, sales began to slip.
As for Krispy Kreme, the company reported third-quarter earnings and lowered its forecast. The company reported revenue of $114.2 million and adjusted earnings per share of $0.16, whereas analysts were looking for sales of $114.6 million and EPS of $0.15. Furthermore, the company predicted that full-year 2015 earnings would be in a range of $0.71 to $0.76 per share, while analysts had been predicting EPS of $0.77. While these misses don't seem all that bad on the surface, the company has a massive price-to-earnings ratio of more than 60, which means investors had been, and still are, looking for a high-growth company priced for perfection. Since Krispy Kreme missed on revenue and lowered forward guidance, the days of perfection are over, thus investors are pushing the price lower.
Lastly, some good news: Shares of Tesla Motors (TSLA -1.11%) are up 13% after the German Federal Motor Transport Authority cleared the Model S, saying that no manufacturer defects caused any of the fires we have recently begun seeing with the car. This is great news, and it likely paves the way for U.S. authorities to make a similar call sometime in the near future. Shares of Tesla have been tumbling for a number of weeks, and today's move higher is certainly what shareholders needed.
