Why Lions Gate Entertainment, Carnival, and Himax Technologies Tumbled Today

Consumers make up a vital component of the health of the U.S. economy, and today, signs of strength among consumers helped send the stock market higher. The Conference Board's Consumer Confidence Index rose today, indicating the belief among consumers that conditions six months into the future are poised to improve. Yet even though the stock market managed to climb significantly based on that overall positive sentiment, Lions Gate Entertainment (NYSE: LGF  ) , Carnival (NYSE: CCL  ) , and Himax Technologies (NASDAQ: HIMX  ) all sank considerably on Tuesday.

Lions Gate fell almost 7%, more than wiping out all of its gains from Monday in the aftermath of the release of its new Divergent movie. Investors had high hopes for the young-adult movie, with some shareholders expecting it to spawn another highly profitable multi-part franchise. Opening-weekend figures were solid but fell short of blockbuster status, and the real question for Lions Gate going forward is whether the movie-production studio will be able to secure the talent it needs to move forward with future installments of the franchise while keeping costs down enough to clear a strong profit for the overall series.

Carnival sank 5% as the cruise-ship operator warned that it might not be able to make a profit for the quarter. Ordinarily, the winter season is a huge one for Carnival and its cruise peers, but a bad reputation from previous incidents has forced the company to offer substantial discounts to would-be customers in order to entice them onto Carnival ships. With rivals adding to the number of total cruise ships available, it takes even more aggressive promotional activity in order to keep those ships full, and Carnival expects to spend an extra $100 million or more on advertising in 2014 than it did two years ago. By marking down profit estimates for the full year, Carnival is suggesting that the entire industry could be in for a long-term struggle to keep growing.

Source: Google.

Himax plunged 11% on a downgrade from Bank of America, which argued that the flat-panel chip producer faces a tough competitive environment that will weigh on earnings both this year and next. Given the stock's high valuation, counting on Himax to grow into its share price through capacity growth could be risky, especially if the company can't manage to find customers to meet higher supply with greater demand. Moreover, many investors are looking at the company's relationship with Google (NASDAQ: GOOGL  ) and its Google Glass product, pointing to Luxottica's (NYSE: LUX  ) deal with Google to help design a more widely distributed Google Glass through its Ray-Ban and Oakley brands. Yet Google Glass' future is uncertain, both in terms of how popular the product might be and when it would be available.

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Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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