Please ensure Javascript is enabled for purposes of website accessibility

Why Southwest Airlines, The Trade Desk, and Slumped Today

By Dan Caplinger – Updated Apr 15, 2019 at 11:16AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Downgrades and earnings worries hurt some well-known stocks.

Wednesday was a pretty quiet day on Wall Street, as market participants generally shrugged off the latest news from monetary policymakers about the future course of interest rates. The Federal Open Market Committee's latest meeting minutes got released, but they largely confirmed what most investors had already suspected: The Fed isn't concerned about inflation and seems poised to slow in its efforts to shrink its balance sheet following unprecedented quantitative easing during and after the financial crisis. That was received generally neutrally by the market, but some stocks had bad news that sent their share prices lower. Southwest Airlines (LUV 0.03%), The Trade Desk (TTD 0.43%), and (WIX -2.34%) were among the worst performers. Here's why they did so poorly.

Check out the latest earnings call transcripts for Southwest, The Trade Desk, and Wix.

Southwest sees some turbulence

Shares of Southwest Airlines fell nearly 6% following two pieces of bad news. First, the airline giant issued a warning about its first-quarter sales projections, arguing that the government shutdown will cost the company about $60 million in lost revenue. That's much larger than its previous estimate of the shutdown's impact, and Southwest also reduced its estimated growth in operating revenue per available seat mile by a percentage point to a new range of 3% to 4%. In addition, analysts at Goldman Sachs cut their rating on Southwest from neutral to sell, reducing their price target by $12 to $54 per share on worries that the costs of expanding to include Hawaii service in its route map could prove excessive. Between that and potential problems with weight-and-balance regulations and maintenance issues, Southwest is seeing a lot of trouble all at once.

Southwest aircraft on airport tarmac in a desert climate.

Image source: Southwest Airlines.

The Trade Desk takes a tumble

The Trade Desk saw its shares fall 7% after getting negative comments from stock analysts. Stifel was the culprit this time, cutting its rating on the programmatic advertising specialist from buy to hold and citing the big increase in the stock price as a reason for caution going forward. The Trade Desk is due to report its latest earnings on Thursday, and the company has a history of being somewhat conservative with its guidance. That could spook optimistic investors, and the downgrade sent the stock lower despite Stifel's assertion that it still finds the company's long-term prospects attractive and would be likely to buy shares if they fall considerably from recent levels.

Wix can't live up to expectations

Finally, shares of dropped almost 12%. The website facilitator reported its fourth-quarter financial results, and they were largely strong, with revenue climbing 39% on a 67% rise in free cash flow. Adjusted earnings per share more than doubled from year-ago levels, topping the consensus forecast among investors. But what seemed to spook shareholders was Wix's guidance for 2019, which included projected full-year revenue growth of 25% to 26%. That's a considerable slowdown, and despite its assertions that its product lineup remains healthier than ever, Wix will have to convince investors that it can grow as quickly as possible as long as it can.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Southwest Airlines, The Trade Desk, and The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.