The stock market ended the week on a positive note Friday as general investor optimism helped produce gains of between a quarter-percent and half-percent among major market benchmarks. Earnings dominated the news, and overall, investors seem satisfied with the way the just-started earnings season has gone so far. The acceleration in the pace of earnings releases will hit a peak over the next couple of weeks, and until then, bigger-picture issues will likely take a back seat to individual stock moves motivated by company-specific news.
Despite the overall positive tone, several stocks lost ground today, and PayPal Holdings (NASDAQ:PYPL), Olin (NYSE:OLN), and Skyworks Solutions (NASDAQ:SWKS) were among the worst performers in the market on Friday.
PayPal falls on Visa deal
PayPal Holdings dropped 7% in the wake of two news items. The company reported its second-quarter results Thursday night, which included better-than-expected revenue both for the quarter and in its full-year guidance. That initially pushed shares up in after-hours trading following the report, but PayPal also said it had entered into a partnership with rival Visa to work together toward a more collaborative relationship. PayPal argues that the partnership will speed up the adoption of digital payments throughout the retail industry, but investors were unimpressed by the extent to which PayPal agreed to terms they believed were more favorable to Visa. In particular, PayPal agreed to offer Visa cards as an equal payment option rather than encouraging PayPal members to link bank accounts via automated clearinghouse transfers, which are cheaper for the electronic payments company and take revenue away from Visa. The impact could be lower profit margin for PayPal, and investors don't want any erosion of growth rates for the digital payment specialist going forward.
Olin plunges as it expects a tougher future
Olin plummeted more than 20% after the ammunition-maker issued a warning on profits for the second quarter and full year. The company said it now expects net income to be close to the breakeven point, which is a far cry from the roughly $0.30 per share investors were looking to see. Olin blamed the shortfall on weaker demand for caustic soda during May and June from domestic buyers, and that hit Olin's ability to maintain pricing power. Full-year guidance reductions reflect the same issues, along with weak export pricing, lower sales in certain segments, and higher costs for raw materials. CEO John Fischer argued that "the fundamentals of the business are unchanged," but that wasn't enough to reassure shareholders.
Skyworks falls out of the sky
Finally, Skyworks Solutions fell 9%. The specialist in mobile communications semiconductor chips reported earnings Thursday night that called into question the pace of its growth trajectory going forward. Skyworks suffered a 7% drop in revenue that sent net income down by almost 11% during the fiscal third quarter, and many investors looked askance at a $100 million rise in inventory levels in anticipation of an expected release of an iPhone 7 model. However, Skyworks also warned that the current quarter would continue to show declining sales and net income, and shareholders appeared to be impatient enough to bid down the stock. Even moves to increase its dividend and authorize a larger buyback of shares weren't enough to prevent the drop, and instead, Skyworks investors will want to see big gains from its relationship with the most important mobile device provider in the business.