AOL and Groupon Plunge

Shares of AOL and Groupon were down significantly early on Wednesday, while Intel stock rose modestly.

May 7, 2014 at 11:30AM

The Dow Jones Industrial Average (DJINDICES:^DJI) was up more than 58 points as of 11:35 a.m. EDT. Chipmaker Intel (NASDAQ:INTC) posted a modest 0.74% gain alongside its index. But shares of both Groupon (NASDAQ:GRPN) and AOL (NYSE:AOL) had declined by more than 19% in early trading.

Fed chairwoman says accommodation remains warranted
In prepared remarks to a congressional committee, Federal Reserve Chairwoman Janet Yellen stated that a high degree of monetary accommodation remains warranted. Yellen cited a number of ongoing risks to the U.S. economy, including a slack labor market, persistent inflation below 2%, and flattening housing activity.

Yellen's remarks suggest the central bank will continue to support the U.S. economy for the foreseeable future. Although the Fed has curtailed its asset purchases, it is still buying $45 billion worth of bonds per month. While a weaker than expected economy is poor for the stock market, Fed support should help markets remain elevated.

Intel announces Chromebook focus
In partnership with several major PC OEMs, Intel unveiled several new Chromebook models on Tuesday. All of them were powered either by Intel's Bay Trail processor or its Core i3 processor.

As the PC market has declined, Intel has sought to branch out into new markets, working feverishly to get its chips in tablets and smartphones. Chromebooks represent a potential area of growth, as despite their PC-like form factor, Chromebooks have seen increasing demand in recent months, particularly from educational institutions.

Groupon drops after earnings
Groupon shares lost almost one-fifth of their value early on Wednesday after the company reported quarterly earnings Tuesday after the bell.

Groupon's saw a loss per share of $0.01 on revenue of $757.6 million, beating analysts' expectations of EPS loss of $0.03 on revenue of $738.4 million. For the current quarter, Groupon expects to post earnings per share of breakeven to $0.02; analysts have been a bit more optimistic, anticipating EPS of $0.03.

That difference in guidance was likely plaguing Groupon's stock on Wednesday. The online deal specialist is also historically a highly volatile stock, and as it continues to post losses, a speculative one at that.


Source: Wikimedia Commons.

AOL plunges
AOL shares were down nearly 23% in early trading after it turned it a disappointing earnings report. 

AOL's revenue of $583 million beat analysts' consensus estimate of $578 million, but earnings per share of $0.34 was well under the $0.45 projection.

AOL has restructured its business in recent months, spinning off Patch and deemphasizing some other brands. Even with Wednesday's decline, AOL shares are still trading with a price-to-earnings ratio near 30 -- a multiple higher than the broader market.

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Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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