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Why Netflix, Atlassian, and Gildan Activewear Slumped Today

By Dan Caplinger - Oct 18, 2019 at 4:32PM

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Find out why these stocks led the market lower.

The stock market posted losses on Friday, reacting negatively to some weak readings on the Chinese economy and ongoing concerns about trade tensions between the U.S. and China. Although the newly started earnings season had generally gone well earlier in the week, some less optimistic reports last night and this morning also weighed on sentiment. Major benchmarks didn't have huge declines, but some individual stocks took much larger hits. Netflix (NFLX 1.46%), Atlassian (TEAM -0.97%), and Gildan Activewear (GIL 0.99%) were among the worst performers. Here's why they did so poorly.

Netflix gives back gains

Shares of Netflix dropped 6%, falling back from its gains on Thursday following the release of its third-quarter financial results. The streaming video specialist had initially made investors excited about a rebound in the number of new subscribers it brought on during the quarter, appeasing some fears that a slowdown might continue for an extended period. Yet analysts looking at the stock after the company's latest financial report concluded that risks from heightened competition are still present. For those watching Netflix, all eyes will be on the competitive element of the streaming video space, as new services from rivals are slated to become available next month.

Netflix logo in red.

Image source: Netflix.

Atlassian can't keep up with expectations

Atlassian saw its stock fall 5% despite announcing strong financial results for its fiscal first quarter. The team collaboration software specialist said that revenue jumped 36% from year-ago levels, and adjusted earnings per share soared by 40%. Yet some investors seemed to be nervous about slowing growth in client count, with Atlassian adding just over 7,000 new customers to approach the 160,000 mark. Stocks in the software-as-a-service realm have gotten a big following of investors expecting huge growth, and even when companies deliver solid numbers, they often haven't been good enough lately to satisfy those high expectations. Atlassian's long-term prospects still look strong, but shareholders nevertheless would've preferred to see even more growth right now.

Gildan warns of weakness ahead

Finally, shares of Gildan Activewear plunged 26%. The apparel company announced preliminary third-quarter financial results that included a 2% drop in year over year revenue, and it expects adjusted earnings of about $0.53 per share. Both numbers were weaker than Gildan's previous guidance, as the company said that demand for imprintable clothing was especially soft in North America. The apparel maker also cited generally poor performance in international markets as holding it back. As a result, Gildan now believes full-year 2019 sales will fall by low-single-digit percentages, and a roughly 15% cut to projected earnings for the year also made shareholders more worried about whether the company can meet its full potential going forward.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Atlassian and Netflix. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$244.66 (1.46%) $3.51
Gildan Activewear Inc. Stock Quote
Gildan Activewear Inc.
GIL
$33.09 (0.99%) $0.33
Atlassian Corporation Plc Stock Quote
Atlassian Corporation Plc
TEAM
$281.49 (-0.97%) $-2.77

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