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Why Stock Rallied 8% and Then Tumbled 13% Today

By Reuben Gregg Brewer - Jan 28, 2021 at 3:59PM

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It was a roller-coaster ride for the online retailer's investors, as it opened higher but quickly sank into negative territory. Here's the lowdown.

What happened

Shares of online retailer (FLWS -3.03%) opened the trading day soundly in positive territory, gaining as much as 8%. But shortly thereafter they started falling, dipping as much as 13% in the 2 p.m. EST hour. By 3:30 p.m., the shares were still deeply in the red, off by about 9%. From peak to trough the stock moved more than 20% today, which is a pretty big swing.

So what

There was one notable event here today, with posting fiscal second-quarter 2021 earnings. The numbers were pretty impressive, with the top line advancing some 45% year over year and earnings up by more than 50%. Leading the way was the company's online commerce operations, where sales increased just a hair shy of 60%. The $1.71 per share in quarterly earnings also handily beat the Wall Street consensus of $1.39. The online retailer had a good quarter just about any way you look at it.  

A hand swiping a credit card through a credit card machine

Image source: Getty Images.

However, it continues to hold off on full-year fiscal 2021 guidance, despite the fact that the year is more than half over and that it provided fiscal third-quarter guidance. The projection there is for a loss of between $0.09 and $0.11 a share, which might not sit well with some investors enamored of the company's strong online performance during the pandemic. That said, the business is highly seasonal, with the end-of-year holiday season by far the company's strongest, with a big drop-off in the fiscal third quarter the norm here. Only Wall Street analysts had been looking for a loss of $0.08 per share, which means that is telling investors to pull back their expectations.That's likely the culprit behind the stock swinging from up 8% at the open to down around 10% or so today in the last hour of trading.   

Now what

Investors have driven the shares of higher by over 160% since April 2020, near the depths of the coronavirus bear market. A lot of good news has been priced in and, in many ways, the company has lived up to expectations. However, after such a large run, it's not surprising to see investors take a little money off the table given management's below-consensus outlook for the upcoming quarter and its unwillingness to provide full-year guidance for fiscal 2021. Basically, it has two quarters in the bag, along with a projection for the third quarter, and is unwilling to speculate about the fourth quarter. It leaves one to wonder if is worried that revenue and earnings fall off when people can more easily shop in physical stores again. That's not an unreasonable concern given the pandemic-driven online sales boost from which seems to have benefited.   

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