Why Weight Watchers International, Chegg, and Trulia Tumbled Today

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.

Major stock market benchmarks continued their positive run on Friday, closing the week with a solid advance that has convinced many investors that the pullback in the market in January was merely a short-term correction that won't endanger the longer-term upward trend for stocks. Yet, several individual stocks gave their shareholders disappointing news today, and Weight Watchers International (NYSE: WTW  ) , Chegg (NYSE: CHGG  ) , and Trulia (NYSE: TRLA  ) were among the worst-hit stocks in the market.

Weight Watchers International plummeted 28% after shareholders were left hungry for further growth from the weight-management company. Weight Watchers reported that its earnings fell by nearly half on an 11% decrease in sales, and poor guidance for the coming year that was around 40% to 50% below what investors were expecting weighed on the stock even further. That's consistent with the disappointing outlook that nutritional-supplement retailer GNC Holdings (NYSE: GNC  ) reported today, which also led to its stock plunging almost 15%. The market is now pricing Weight Watchers stock as a pure turnaround candidate, and that's how the company is positioning itself, predicting a hard year but remaining optimistic. Yet, with so much competition in the space, Weight Watchers will have to use its brand recognition to optimal benefit in order to differentiate itself from the pack.

Chegg plunged 22% despite announcing earnings that, by many measures, looked strong. The textbook-rental specialist said that revenue rose 13% in the fourth quarter, with digital-product sales soaring 70% from the previous year. But bearish investors pointed to weak growth in the company's core print-textbook rental division, which still dominates the company's overall revenue mix. Expectations for weaker margins, and a wider adjusted EBITDA loss in 2014, also made shareholders question whether Chegg can grow fast enough to build a moat against prospective competition. Chegg needs to transform more of its business to higher-margin digital products and services if it wants to justify the valuations that investors have put on the company.

Trulia fell 18%, pulling rival Zillow (NASDAQ: Z  ) down 10% as investors prepare for more intense competition between the two online real-estate companies. Even though Trulia's sales doubled for the quarter, its losses soared, and the company's weak guidance for the current quarter points to its need to be more aggressive in hitting Zillow head-on. With the company expecting to spend $65 million on advertising in 2014, Trulia sees the need to maximize its growth potential right now -- even if it means delaying greater profitability into the future. As both Trulia and Zillow seek out the positive impact of network effects, investors can expect continued volatility throughout the year.

Get smart about your stocks
Opportunities to get wealthy from a single investment don't come around often, but they do exist, and our chief technology officer believes he's found one. In this free report, Jeremy Phillips shares the single company that he believes could transform not only your portfolio, but your entire life. To learn the identity of this stock for free and see why Jeremy is putting more than $100,000 of his own money into it, all you have to do is click here now.


Read/Post Comments (0) | 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.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2840925, ~/Articles/ArticleHandler.aspx, 11/28/2014 2:25:57 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement