This Week's 5 Dumbest Stock Moves

Stupidity is contagious -- even respectable companies can catch it. As we do every week, let's look at five dumb financial events from this past week that may make your head spin.

1. We deserve better scapegoats
Many retailers blamed slow retail sales this past holiday season on the wintry snowstorms that froze shoppers through December and January. Then they blamed the Easter holiday's move from March to April as the cause of continuing weakness the following quarter. Well, the industry is fresh out of scapegoats, so now it's exonerating the scapegoats of yore. 

"We thought our sluggish sales were all because of weather and calendar shifts that began last November and continued into the spring, but now we've come to realize it's more than weather and calendar," The Container Store (NYSE: TCS  ) CEO Kip Tindell on Tuesday. "Consistent with so many of our fellow retailers, we are experiencing a retail 'funk.'"

Tindell's realization was naturally accompanied by bad news. The Container Store's comparable-store sales declined 0.8% in its fiscal first quarter ending in May. He sees comps stabilizing in the next two quarters before bouncing back during the seasonally potent fourth quarter, but his refreshed guidance suggests that things still aren't humming along. 

The Container Store is now expecting to earn $0.49 a share to $0.54 a share on $820 to $830 million in sales this fiscal year. Just three months ago the home storage and housewares retailer was targeting as much as $0.61 a share in profitability on $837 million in revenue.

2. This is just networking out
It wasn't just The Container Store hosing down its near-term prospects. Gigamon (NYSE: GIMO  ) shares took a beating after revealing that revenue for the second quarter will clock in between $34.5 million and $35 million. Its previous guidance was calling for $38 million to $42 million on the top line.

There's no "retail funk" here, as Gigamon's trade is in providing networking hardware solutions for companies. It blames the shortfall on its failure to convert potential customers, who seem to be subjecting their IT decisions to longer review and approval cycles. That's bad news for Gigamon, but it could also be bad news for others in this space if it's true across the industry.

3. Something wicked this way comes
Comcast  (NASDAQ: CMCSK  )  finally had the grand opening for its Diagon Alley expansion at Universal Orlando's Wizarding World of Harry Potter. It's amazing in many ways, starting with the rich details of the London and Diagon Alley recreations to the delightful high-capacity Hogwarts Express ride that connects Universal Orlando's two theme parks with some Potter-themed whimsy.

However, the opening makes the cut in this week's column because its signature ride -- Harry Potter and the Escape from Gringotts -- has been an operational nightmare. The 3-D indoor coaster has had prolonged outages throughout the week, leading to long lines, frustrated park guests, and even an evacuation or two along the way. The setbacks and low capacity have resulted in queues as long as 450 minutes. Where's some wizard magic when you need it?

4. Rent a wreck
If there is any truth to The Container Store's "retail funk" theory, it would follow that folks are saving money by renting instead. This would seem to benefit Rent-A-Center (NASDAQ: RCII  ) , but it, too, is warning of a material softness in its current performance. It sees a profit of no more than $0.38 per share on revenue of $773 million for the quarter that just ended, well short of the $0.48 per share in earnings on $786 million in revenue that analysts were forecasting. 

However, Rent-A-Center makes the cut this week because of its strategy to get back on track.

"We are not satisfied with our second quarter results and hold ourselves accountable for improving our performance," the rent-to-own chain's CEO said in an honest assessment before moving on to its new growth drive. "To that end, we are excited to announce a new product line in our domestic retail stores with our entrance into the burgeoning smartphone business."

Really? Rent-A-Center is going to offer its cash-strapped customers smartphones on a rent-to-own basis. It claims it's an industry first, but this seems like a recipe for disaster given the way phones are scratched and damaged along the way.

5. CYNK or swim
You don't often see a penny stock quietly balloon into a multibillion-dollar company without much of a business in a matter of days, but that's what has happened in recent weeks to CYNK Technology  (NASDAQOTH: CYNK  ) .

The stock was called out on Wednesday by Business Insider after soaring nearly 25,000% -- 24,417% to be exact -- since June 17 to command a market cap of $4.3 billion. CNBC's Herb Greenberg and others then piled on after realizing that the company is light on assets and revenue and reportedly doesn't have an active business or staff. Who has been buying in without performing due diligence? Investors should know what they're buying into, but that also applies to speculators.

TREND TRACKER: Warren Buffett Says This New Technology Is a "Real Threat"
At the recent Berkshire Hathaway annual meeting, Warren Buffett admitted that an emerging technology is threatening the Oracle of Omaha's bread and butter. And it's no long a question of "if... but when," according to the industry's foremost research firm. Find out how you can cash in on this technology before the crowd catches on, by jumping onto one company that could get you the biggest piece of the action. All the details are laid out in a new FREE investor alert from The Motley Fool. Click here now to learn more!

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: 3025722, ~/Articles/ArticleHandler.aspx, 9/1/2015 2:10:51 PM

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...

Rick Munarriz

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

Today's Market

updated Moments ago Sponsored by:
DOW 16,141.86 -386.17 -2.34%
S&P 500 1,924.90 -47.28 -2.40%
NASD 4,678.48 -98.03 -2.05%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/1/2015 1:54 PM
CMCSK $56.65 Down -0.59 -1.03%
Comcast Corp CAPS Rating: ***
CYNK $0.15 Down +0.00 +0.00%
GIMO $22.41 Down -0.37 -1.62%
Gigamon CAPS Rating: ***
RCII $26.07 Down -0.82 -3.05%
Rent-A-Center CAPS Rating: ***
TCS $16.68 Down -0.23 -1.36%
The Container Stor… CAPS Rating: ****