Why Vector Group, OpenTable, and magicJack VocalTec Tumbled Today

Even though the stock market wasn't able to post dramatic gains, it still made minimal progress Tuesday. But these stocks fell sharply. Find out why.

May 13, 2014 at 8:30PM

On Tuesday, stocks were mixed, with minimal gains for broad-based large-cap benchmarks pushing them further into record territory, but continued weakness in the Nasdaq and in small-cap indexes. The disparity highlights the uncertainty in the market right now, as investors gravitate toward the biggest, strongest stocks rather than speculating on the higher-growth potential of up-and-coming smaller companies. Yet even though the broader market performed reasonably well today, several stocks fell sharply, with Vector Group (NYSE:VGR), OpenTable (NASDAQ:OPEN), and magicJack VocalTec (NASDAQ:CALL) among the worst performers on Tuesday.


Source: FDA.

Vector Group dropped 6% after the maker of discount-brand tobacco products announced its first-quarter earnings results. The report highlighted the relative success of Vector Group's two independent business segments. The entire tobacco industry has seen big challenges recently, and Vector Group's tobacco business saw continued weakness, with unit sales of tobacco falling 6% and overall revenue from the segment declining by 3% despite price increases. Meanwhile, though, Vector Group's real-estate business performed far better, with a 37% jump in segment revenue. The big question facing Vector Group shareholders is whether the company is making a transition away from tobacco, or whether Vector Group will end up spinning off its interest in its realty unit and become a pure-play tobacco company once again.

OpenTable fell 7% as shareholders reacted negatively to news that a competing provider of restaurant reviews and information will offer a free restaurant reservation system, going head-to-head against OpenTable in its core business. Merger and acquisition activity in the restaurant-marketing and service arena has been fierce lately, with major tech players seeking ways to expand their offerings and cater to potential restaurant customers. Yet OpenTable CEO Matthew Roberts seems confident that OpenTable will be able to face up to competition and retain its command of the restaurant-reservation niche for the long haul.


Source: magicJack VocalTec.

Today's 14% drop for magicJack VocalTec gave up all of yesterday's gains and more, as the provider of voice-over-Internet communications disappointed investors with its first-quarter report. Earnings were better than expected, but revenue fell by more than 4%, and gross margins declined by nearly seven full percentage points. Shareholders also don't seem optimistic about magicJack VocalTec's longer-range projections, even though full-year revenue guidance was slightly ahead of what most investors had expected. The big question for magicJack is whether its ongoing efforts to find growth will prove successful, and share-price volatility shows that you'll find investors on both sides of the fence on that question.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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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