Friday was generally favorable on Wall Street, although pockets of weakness in the tech and small-cap area held back the Nasdaq Composite and Russell 2000 indexes even as the Dow and S&P 500 climbed. Trade remained a major issue for investors to consider, but the coming second-quarter earnings season also promises to introduce volatility. Despite big gains in the energy market, some companies suffered bad news that sent their shares sharply lower. BlackBerry (NYSE:BB), J.C. Penney (NYSE:JCP), and Splunk (NASDAQ:SPLK) were among the worst performers on the day. Here's why they did so poorly.
Shares of BlackBerry fell close to 9% after the mobile device pioneer reported its fiscal first-quarter financial results. Investors reacted negatively to news that the company's growth rate will slow substantially, reflecting BlackBerry's decision to move toward a subscription-based model that will result in a one-time disruption to its top-line results. Most investors have gotten used to the idea that BlackBerry now wants to concentrate on higher-growth areas like automotive software in the budding Enterprise of Things space. Yet today's drop makes it clear that some shareholders are still coming to terms with exactly what BlackBerry's transformation will mean, at least in the short run.
Penney gets tarnished
J.C. Penney stock sank 5%, falling despite what a former executive called good news for the department store retailer. On Thursday, the Supreme Court overturned its previous decision and will now allow states to impose sales tax on online retailers. That arguably puts brick-and-mortar retailers like J.C. Penney on an even footing with their internet counterparts, and former J.C. Penney CEO Allen Questrom was positive about what impact the high court decision will have on the industry. Yet even if the company can win back incremental business from online retailers that had been able to claim a modest pricing advantage based on sales tax disparities, it will still have to compete hard against its department store peers in order to return to its former footing.
Splunk goes plunk
Finally, shares of Splunk dropped 7%. The data analytics company likely felt pressure from poor performance from open-source software specialist Red Hat, which warned that results in the current quarter could deteriorate from previous growth rates. Also contributing to the declines was simply the fact that the stock had seen such dramatic gains recently, having roughly doubled between mid-2017 and earlier this month. Splunk isn't yet profitable, but its top-line growth rates are strong enough that positive earnings aren't too far away at this point. Given the utility of its services, Splunk has plenty of opportunities to grow even if Red Hat and some other companies in the space end up falling behind.