Why Aeropostale, Inovio Pharmaceuticals, and Aruba Networks Tumbled Today

Friday was a good day for the stock market on the whole, as the S&P 500 moved above 1,900 for the first time ever, and major-market benchmarks gained ground across the board. Yet, despite some of the persistently favorable trends that have helped bolster the fortunes of stock investors lately, Aeropostale (NYSE: ARO  ) , Inovio Pharmaceuticals (NASDAQ: INO  ) , and Aruba Networks (NASDAQ: ARUN  ) fared poorly today in light of negative news that hit their respective stock prices hard.

Aeropostale plunged almost 25%, as the teen retailer reported horrible results for its most-recent quarter. Same-store sales plummeted by 13%, which was even worse than investors had expected, and Aeropostale warned in its earnings guidance for the current quarter that the situation would get worse before it got better. Even analysts who had been bullish on the stock finally decided they'd had enough, as it remains unclear how Aeropostale will be able to reverse the exodus of fickle teen shoppers from the retailer's stores. Especially among stores targeting younger shoppers, the fashion world is full of stories of companies falling out of style, and while Aeropostale might be able to manufacture a rebound, the odds appear to be against it at this point.

Inovio Pharmaceuticals fell 9% after the biotech stock said that it would do a reverse share split on its stock. Shareholders approved the measure yesterday, which will involve the reissuance of one share of stock for every four that investors currently own. Inovio didn't disclose the effective date of the reverse split, but even though the move doesn't change the fundamental value of the company, reverse splits are generally seen as a sign of a lack of confidence that a company's share price can return to higher levels on its own. The concern Inovio shareholders have is that a reverse split could merely make the stock look more prone to short-selling attacks in the future, potentially making the higher share price only a temporary phenomenon.

Source: Aruba Networks.

Aruba Networks dropped 11% in the aftermath of its quarterly report. Sales growth of 28% wasn't enough to satisfy investors, especially given a shortfall in gross margins that held earnings per share down from what such a strong revenue gain would usually produce. There's no doubt that wireless connectivity is a growth industry, especially with the proliferation of mobile devices requiring more advanced security and stability features to handle rising traffic. The question, though, is whether Aruba's competitors will do a better job of capitalizing on the opportunity than Aruba, and shareholders are selling first and asking questions later in light of the uncertainty.

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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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8/28/2015 4:00 PM
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