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's latest zinger
Zynga (NASDAQ: ZNGA  ) was supposed to report quarterly results next week. When it bumped the report a week early, one had to assume that either it was being acquired by an opportunistic bottom-feeder or it had some bad news to spill.

It seems it will be the latter, even if the stock is initially moving higher on the announcement of another mobile-gaming acquisition and layoffs.

Another quarter of cascading revenue and bookings finds Zynga trying to disguise the organic deterioration in its business by shopping for growth. It's snapping up NaturalMotion, the mobile-gaming app-developer behind CSR Racing and Clumsy Ninja.

The market's liking the moves, but investors seem to have a short memory here. Zynga's been burned in the past by chasing a social gaming speedster. Eventually, players grow tired of the flavor of the week, and Zynga's left holding degrading properties. Zynga is pointing to improvement later this year, but that's not something that's easy to believe when it's accompanied by the rollout of job cuts.

2. Apple disconnects
  (NASDAQ: AAPL  ) posted uninspiring quarterly results on Monday afternoon.

Net income growth was flat, and revenue actually declined slightly in the Americas. The iPhone and iPad as growth drivers only saw their revenue inch 6% and 7% higher, respectively. The smartphone and tablet markets are growing faster than that, so does Apple continue to yield share as these products go mainstream or does it make a margin-squeezing play to reach a broader audience?

The market responded to Apple's disappointing iPhone sales by sending the shares sharply lower on Tuesday. Apple is back to proving that Tim Cook is the right person at the helm again.

3. Microsoft is "settling"
Like the heroine of a 1980s romantic comedy, it seems Microsoft (NASDAQ: MSFT  ) has been searching high and low for that someone special when he's been right there all along.

Several reports on Thursday have Satya Nadella -- Microsoft's head of cloud computing and enterprise software -- pegged as the company's next CEO. The market rallied this past summer when Steve Ballmer announced that he would be stepping down within the year once a replacement is found.

The market was probably holding out for an outsider to breathe new life into the software giant. It may turn out that Nadella is a smart choice after all -- he's certainly better than the initial internal candidate being discussed, Stephen Elop, who left Microsoft to destroy Nokia's handset business before coming back to Mr. Softy last year. However, we've been holding out for nearly half a year for a new CEO, and an internal hire isn't going to cut it. 

4. Alarming news out of ADT
(NYSE: ADT  ) saw its shares plunge 17% on Thursday after posting disappointing quarterly results

Coming in short of Wall Street profit targets is no great surprise. ADT has only beaten analyst estimates once over the past year. However, the miss came despite massive share buybacks over the past year that disguise the 27% plunge in net income.

Then again, could the miss actually be because of the stock repurchases? In his TheStreet column, Herb Greenberg argues that ADT should have spent more of its money marketing its services than overpaying for its inflated stock.

He has a point. Despite ADT's push into home automation, its customer base rose by less than 1% over the past year.

5. Light up the Barbie
Mattel  (NASDAQ: MAT  ) wrapped up this volatile trading week with a bad quarter of its own. The toymaker's worldwide sales, operating profits, and adjusted earnings all declined during the holiday quarter. Mattel fell short of market expectations on both ends of the income statement.

We can blame a problematic 13% slide in sales at both Barbie and Fisher-Price. Hot Wheels also didn't help the cause, shifting into reverse for an 8% decline. American Girl sales were up, but naturally not enough to save the rest of the playthings powerhouse.

We are living in changing times, and the push for electronic playthings and digital diversions is clearly weighing on this traditional toymaker.  

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  • Report this Comment On February 01, 2014, at 1:02 AM, yragsapo wrote:

    You're a fool to think that market share matters to Apple. They are selling high-end products and market share is driven by low-margin, low-end Android devices. Why do you expect Apple to compete with $60 tablets that are sold in Walmart? Do you expect Porsche to sell $10,000 vehicles, just to drive up their market share?

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Rick Munarriz

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

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