Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
The stock market responded negatively today as the Federal Reserve continued to put off the long-anticipated reduction of bond-buying activity under its quantitative easing program, instead keeping its $1 trillion annual pace of purchases unchanged. Broad market benchmarks fell about half a percent as a results, but LinkedIn (NYSE:LNKD.DL), Cirrus Logic (NASDAQ:CRUS), and SodaStream International (NASDAQ:SODA) all posted much more substantial declines. Let's take a closer look to find out what sent those stocks falling today.
LinkedIn's share price fell by more than $23 per share, or about 9%, following its third-quarter results. Despite sales gains of 56% at the business-oriented social networking company and adjusted earnings per share that easily topped investors' expectations, LinkedIn's drop came from weaker guidance for fourth-quarter revenue than analysts had projected. Still, member counts reached 259 million during the quarter, bolstering LinkedIn's network effect and making it more valuable to prospective business customers and other sources of potential revenue. High-growth stocks are notorious for occasional drops as the pace of sales and earnings growth inevitably slows, and LinkedIn's expensive valuation compared with near-term earnings expectations leaves it vulnerable to disappointment.
Cirrus Logic plunged 14% after whipsawing investors after its earnings report last night. The chipmaker's stock initially saw gains after reporting better-than-expected revenue and earnings in its fiscal second quarter, and Cirrus also projected a sales range whose midpoint was higher than investors' current expectations. Yet two Wall Street analysts weighed in against the company today, arguing that the positive contribution of the iPhone 5s and 5c releases raised questions about Cirrus Logic's continued reliance on Apple for the vast majority of its sales. In addition, expectations for lower margins could reflect pressure from Apple, using its leverage to cut its own costs at Cirrus Logic's expense.
SodaStream stock fell 11%. The maker of home-carbonator systems enjoyed solid sales gains of 29% and managed to limit its decline in year-over-year earnings per share to 5%, which was actually better than investors had expected. But skeptics pointed to slowing growth in sales of SodaStream's flavorings, which represent a big part of the company's long-term strategic plan to boost profit growth, as a sign of potential weakness. Solid CO2 sales gains indicate that owners are still using their SodaStream systems, but given the partnerships that the company has made with big-name companies to offer name-brand drinks like Country Time and Crystal Light, weak syrup sales are especially disappointing.