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

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.

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.

Leaked: This coming blockbuster will make every biotech jealous
The best biotech investors consistently reap gigantic profits by recognizing true potential earlier, and more accurately, than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not only how we treat a common chronic illness, but potentially the entire health industry. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns, you will need to Motley Fool's new free report on the dream-team responsible for this game-changing blockbuster. CLICK HERE NOW.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2992902, ~/Articles/ArticleHandler.aspx, 11/24/2014 3:29:17 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement