Why Organovo Holdings, lululemon athletica, and Ariad Pharmaceuticals Tumbled Today

Fighting in Iraq caused the stock market to tumble Thursday, but these stocks had even bigger problems pulling them down.

Jun 12, 2014 at 8:34PM

Bad news in the Middle East is rarely good news for the stock market, and the rising tensions in Iraq were one of the primary factors pulling down stocks on Thursday. While it's too early to tell whether the long-term impact of the Iraqi situation will have global economic impacts, the kneejerk reactions in the energy market raised near-term concerns about whether a market that many see as already overvalued can continue to climb. Helping to sour the mood of investors today were Organovo Holdings (NYSEMKT:ONVO), lululemon athletica (NASDAQ:LULU), and Ariad Pharmaceuticals (NASDAQ:ARIA), each of which fell sharply today.

Source: Organovo Holdings.

Organovo Holdings dropped 7% after the 3-D bio-printing specialist issued its full-year financial report for fiscal 2014. The numbers showed a big jump in expenses, ranging from research and development to general overhead costs. Those figures made investors nervous that a further round of potentially dilutive secondary stock offerings might be necessary at some point in the not-so-distant future. Few investors dispute the potential that Organovo has to revolutionize the way that transplants and implants are done, but it's unclear whether Organovo's success will come soon enough to reward early investors sufficiently for their loyalty.

Lulu Woman

Source: Lululemon Athletica.

lululemon athletica plunged 16% as the yoga-apparel retailer once again disappointed investors with its quarterly results. Even though Lululemon said it would buy back $450 million of its shares, the company's fiscal first-quarter profit dropped 60%. Same-store sales rose 1% for the quarter, but Lululemon said that it expects a reversal in comps in the current quarter, with percentage declines in the low- to mid-single digits. In addition, reduction in Lululemon's full-year guidance by 5% to 7% didn't do anything to dispel fears that the worst could still be yet to come for the yoga retailer. With customers not having reestablished their loyalty to Lululemon after the now-infamous yoga-pant fiasco, competitors have taken full advantage, and Lululemon might not be able to win those defectors back to its cause.

Ariad Pharmaceuticals fell 9% after the company priced an offering of convertible senior notes. To raise capital, Ariad offered $200 million in notes paying 3.625% and allowing bondholders to convert their notes into shares at a price of $12 per share. That's well above the current share price, limiting the potential dilution to existing shareholders. Nevertheless, for those investors who believe that Ariad has huge upside potential, having convertible noteholders share in their long-term profits isn't the ideal result.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Lululemon Athletica. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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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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