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Why Box, Luckin Coffee, and Orchard Therapeutics Slumped Today

By Dan Caplinger - Jun 4, 2019 at 4:33PM

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Find out why these stocks were among the few to lose ground on a winning day for the market.

Tuesday was a strong day on Wall Street, as investors reacted favorably to the idea that the so-called "Fed put" might finally be back in the market. Even as geopolitical and trade-related woes threatened to send the U.S. economy toward a possible recession, members of the Federal Reserve's governing board indicated that they stood ready to provide accommodation in monetary policy if signs of a slowdown began to emerge. Major market benchmarks picked up 2% or more, but some stocks missed out on the rally. Box (BOX -4.47%), Luckin Coffee (LKNC.Y -0.98%), and Orchard Therapeutics (ORTX -2.08%) were among the worst performers. Here's why they did so poorly.

Box sees a slowdown

Shares of Box dropped 4% after the cloud content management specialist posted disappointing results in its fiscal first-quarter report. Box said that revenue growth came in at 16% compared to the previous year's quarter, and it lost slightly less money during the period than most of those following the stock had expected. However, Box cut its forecast for full-year results, citing longer sales cycles in generating new business from major customers. In the long run, the cloud company believes that its patience should be rewarded with more loyal clients, but investors weren't willing to wait amid fears that cloud stocks might have come too far, too quickly.

Man on stage in front of a crowd, with Box Works logo behind and on podium.

Image source: Box.

Luckin cools off

Luckin Coffee saw its stock fall 4% as the Chinese coffee upstart paused in its recent rebound. The company had seen poor performance immediately following its IPO last month, but investors seemed to gravitate back toward Luckin as fears of weakening U.S.-China trade relations supported the idea that Chinese consumers might favor Luckin over Starbucks (SBUX -2.46%) if tensions remained high. Today's stock market rebound signals hope that a trade resolution might still be in the cards, and by giving Starbucks a chance to compete more effectively in China, it could conversely hurt Luckin's chances. Nevertheless, the Chinese market is big enough for both Luckin and Starbucks to succeed, and long-term shareholders in both companies could well see gains from current levels.

Orchard follows a familiar pattern

Finally, shares of Orchard Therapeutics plunged 16%. The biopharmaceutical company said that it would sell 9 million American depositary shares in a secondary public offering, with the intent of using the proceeds to fund ongoing development of candidate treatments, as well as the commercialization of its Strimvelis treatment for a rare disease known as ADA-SCID. Orchard shares had performed reasonably well coming into its latest earnings report about a week ago, and it's not unusual for companies in the pharmaceutical and biotech space to take advantage of favorable conditions to raise cash. Despite the dilution of shareholders from the move, the benefit for Orchard is that it should now be set up for continued growth without any further need to worry about liquidity in the immediate future.

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Stocks Mentioned

Box, Inc. Stock Quote
Box, Inc.
BOX
$27.23 (-4.47%) $-1.27
Luckin Coffee Inc. Stock Quote
Luckin Coffee Inc.
LKNC.Y
$8.08 (-0.98%) $0.08
Orchard Therapeutics plc Stock Quote
Orchard Therapeutics plc
ORTX
$0.47 (-2.08%) $0.01
Starbucks Corporation Stock Quote
Starbucks Corporation
SBUX
$71.90 (-2.46%) $-1.82

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

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