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Why J.C. Penney, Baidu, and Expedia Slumped Today

By Dan Caplinger - Updated Oct 27, 2017 at 4:50PM

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Even on a strong day for the market, these stocks fell. Find out why.

The stock market soared on Friday, led by generally strong results among the largest technology names in online search, e-commerce, and office productivity software. Major market benchmarks climbed, with the tech-heavy Nasdaq Composite posting the largest gain. Meanwhile, favorable economic signs continued to create a positive mood among market participants, but some companies were unable to participate in the rally. J.C. Penney (JCPN.Q), Baidu (BIDU 1.86%), and Expedia (EXPE 1.66%) were among the worst performers on the day. Below, we'll look more closely at these stocks to tell you why they did so poorly.

Penney warns of tough times ahead

J.C. Penney plunged 16% after the retailer provided an update on its third-quarter performance. Penney said that comparable-store sales will rise just 0.6% to 0.8% for the quarter following the company's decision to clear out slow-moving inventory in key areas like women's apparel. CEO Marvin Ellison said that the impact of the move was positive in improving performance, but liquidation acceleration efforts resulted in a substantial boost to cost of goods sold, weighing on profit. Penney expects to lose $0.40 per share to $0.45 per share this quarter, and full-year comps are expected to be flat to down 1%. That change in outlook forced the retailer to reduce its full-year earnings forecast to a barely profitable $0.02 to $0.08 range. All of this makes the holiday season a make-or-break period for Penney, and if it proves less than entirely successful, many will wonder if the retailer will survive 2018 as a going concern.

J.C. Penney retail location from the outside, with no traffic or customers visible on an overcast day.

Image source: J.C. Penney.

Baidu disappoints

Baidu fell 8% in the wake of its third-quarter earnings release late Thursday. The Chinese search engine giant said that total revenue was up 29% from the year-ago quarter, helping its adjusted profit climb by more than 160%. The company's mobile business continues to gain in importance, and now accounts for nearly three-quarters of total revenue. Yet despite the positive developments, some investors seemed nervous about the slowing pace of growth as Baidu matures, and a fourth-quarter outlook for year-over-year growth of as little as 22% fed those fears. Others simply saw the drop as a natural market reaction, given that the stock had gained nearly 60% in 2017 prior to the news. 

Expedia stays home

Finally, Expedia finished the day down 16%. The online travel service's third-quarter results showed dramatic slowdowns in growth across key metrics, stoking concerns that the company's long period of success could be coming to a close. Hotel room-nights were up 16% from year-ago levels, but that growth rate was only half what Expedia posted last year, and gross bookings gains of 11% looked similarly lackluster. Pundits had already predicted that the quarter would be tough for travel stocks, given the hurricanes that hit the Gulf Coast, the U.S. Southeast and the Caribbean -- but the extent of the slowdown was still shocking. Investors will be watching the next sets of results carefully to determine if Expedia can bounce back from its troubles.

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Stocks Mentioned

Baidu, Inc. Stock Quote
Baidu, Inc.
BIDU
$151.49 (1.86%) $2.76
Expedia, Inc. Stock Quote
Expedia, Inc.
EXPE
$96.40 (1.66%) $1.57
J. C. Penney Company, Inc. Stock Quote
J. C. Penney Company, Inc.
JCPN.Q

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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