After starting off on an upswing, the Dow Jones Industrial Average (^DJI 1.13%) plunged last week following President Obama's reelection, losing 475 points from its peak, or 3.5%. With a political stalemate still confronting the financial well-being of the U.S., the markets showed they had little confidence that the executive and legislative branches had the will to solve the problem.
Coal stocks were one of the big anchors this week with James River Coal (NASDAQ: JRCC) losing 40% of its value, Alpha Natural Resources (NYSE: ANR) down 12%, and Arch Coal (NYSE: ACI) off 11%. With a president that has written off the industry as not part of his energy future, it's not surprising to see their shares sell off.
Such a deal!
Yet over the last five trading days, some stocks managed to do even worse than the indexes or the coal sector, some falling by steep, double-digit percentages. Social media discounting site Groupon (GRPN +4.16%) tumbled 30% on Friday alone, reporting that third-quarter revenues came in below estimates as indications point to slowing growth in online couponing.
With a full year as a public company under its belt, Groupon looks like it may be dwindling away, with its rates of growth slowing to a crawl. While revenues rose 38% on a currency-adjusted basis, gross billings -- or the amount of money it collects from consumers who buy its daily deals -- rose just 5% in the third quarter to $1.22 billion . That's less than the $1.29 billion it collected in the second quarter when gross billings rose 38% from last year, which itself was off from the 103% growth rate it recorded in the first quarter when gross billings came in at $1.35 billion.
The rate of deceleration we're seeing in gross billings raises questions about whether the core coupons business is sustainable, because at this rate we should expect to see actual contraction in the fourth quarter. Groupon is only guiding to 18% revenue growth at most, which would be almost half the rate it enjoyed this time around.
I've long held that there is little moat for Groupon, that rivals like ReachLocal (RLOC +0.00%), Local.com (LOCM +0.00%), and even Google (GOOG 0.59%) offer daily deals, so people aren't loyal to just Groupon but will go to where the discounts are.
Almost from the IPO I've had an underperform rating on Groupon at Motley Fool CAPS, the 180,000 member-driven investor community that translates informed opinion into stocks ratings of one to five stars. I don't plan on changing that rating any time soon, but you can tell me in the comments section if you think the daily deals specialist is really a deal at these prices.
Running circles around the competition
At the other end of the spectrum was biotech Sequenom (NASDAQ: SQNM), whose MaterniT21 Down syndrome test is gaining traction with doctors. It said on Friday that it planned to blow past previous expectations of annual testing volume, and its stock surged almost 19% on Friday.
Last quarter, I said I thought the market misread its earnings results and has been unfairly punishing the stock. While shares have trended down since then, Friday's announcement finally woke investors up to the potential. Sequenom said it was handling about 1,700 MaterniT21 Plus samples a week as of the end of October, or a run rate of about 90,000 tests per year. That's well ahead of the 50,000 billed tests that it previously anticipated it would handle this year, and the final tally will "significantly exceed" that number.
It looks like the fear that investors held regarding Sequenom's failure to win an injunction against a rival it has accused of infringing on its patents and which ended up signing on Laboratory Corporation of America (LH 1.11%) to distribute its tests throughout its 1,000 centers, never materialized.
While Sequenom is not yet profitable, I think we'll see that turn around despite the rise of competition. Doctors and hospitals are obviously becoming enamored with the test that is safer for both mother and child, as the rising run rate indicates. It's just one of the reasons I'm maintaining my outperform rating on Sequenom on CAPS, but you can tell me in the comments box below whether you think it will be able to outmaneuver its rivals and whether the insiders moving en masse to buy stock indicates there's a reason for optimism.
