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Why These 2 Stocks Got Crushed in a Booming Market

By Dan Caplinger – Dec 7, 2021 at 5:30PM

Key Points

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Not every company participated in the rally.

Wall Street enjoyed another broad-based advance on Tuesday, as stock markets built up positive momentum from new signs that fears about the economy and the COVID-19 pandemic might have proven to be overblown.

All it has taken is a couple of days to return the Dow Jones Industrial Average (^DJI -0.59%), S&P 500 (^GSPC -0.49%), and Nasdaq Composite (^IXIC -0.52%) to within 1% to 3% of their all-time record highs.


Daily Percentage Change

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Data source: Yahoo! Finance.

Yet even with the market doing a good job of posting a broad-based advance, there were still a couple of stocks that got left out. In particular, shareholders in AeroVironment (AVAV -0.25%) and HealthEquity (HQY -5.60%) got nasty surprises that led to double-digit percentage declines. Below, we'll look more closely at these stocks to find out why they missed out on the Tuesday rally.

Drone operator with headset and hand controller looking out over a sandy landscape.

Image source: Getty Images.

AeroVironment loses altitude

Shares of AeroVironment lost almost 28% on Tuesday. The maker of "Unmanned Aircraft Systems" (UASes) and other robotic products wasn't able to live up to what those following the stock had hoped to see in its latest quarterly report.

AeroVironment's fiscal second-quarter results showed fairly solid improvement from year-earlier numbers. Revenue came in at $122 million, up 32% year over year. The company pointed to solid gains in medium-sized UASes as well as sales of uncrewed ground vehicles that came from a pair of acquisitions during the past year. Adjusted earnings of $0.78 per share were up 62% from year-ago levels, and backlog levels were up more than $40 million to $252 million.

However, investors weren't pleased to see AeroVironment cut back on its outlook for the full 2022 fiscal year. Citing supply-chain delays, extended procurement cycles, and slower decision-making processes in the U.S. government as factors, AeroVironment now expects sales to come in between $440 million and $460 million, with adjusted earnings of $1.23 to $1.37 per share.

Moreover, even these numbers reflect some pretty hefty adjustments. When you consider rising costs for overhead and for research and development (R&D) expenses, the potential for ongoing losses from AeroVironment goes up dramatically.

An unhealthy result for HealthEquity

Elsewhere, shares of HealthEquity ended the day down 25%. The financial institution that is the largest non-bank custodian for tax-favored health savings accounts (HSAs) reported third-quarter results that left investors wanting more.

HealthEquity was active in its efforts to bring in new accounts. The company saw new HSA sales of 151,000 during the quarter, and an acquisition from Fifth Third Bank (FITB -0.81%) resulted in another 160,000 new HSAs being added to the HealthEquity platform. HealthEquity also said that 580,000 new accounts from its acquisition of Further will hit the books in the fourth quarter.

However, financial results didn't look all that good. Revenue rose less than 1% to $180 million, and adjusted earnings of $0.35 per share were down almost 15% year over year. A strong market helped lift HSA asset levels 32% to $16.4 billion, but growth levels in HSAs and total account numbers were more modest.

HealthEquity also disappointed investors with its guidance for the remainder of the fiscal year, with calls for sales of $750 million to $755 million and adjusted earnings of just $1.30 to $1.35 per share; those numbers were lower than in HealthEquity's earlier outlook. Until the environment starts to look more favorable, shareholders might have to deal with depressed share prices for HealthEquity.

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

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