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Big Moves in After-Hours Trading: Pandora and Twitter

By Matt Thalman – Feb 5, 2014 at 9:00PM

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Dow falls despite majority of its components ending the day higher.

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.

Even though the ADP private-sector jobs report came through with weaker numbers than expected today, the major indexes took it in stride. The Dow Jones Industrial Average (^DJI 0.45%) ended the day down just 5 points, or 0.03%, while the S&P 500 fell 0.2% and the Nasdaq lost 0.5%.

Of the three jobs reports scheduled for release this week, the one from ADP doesn't get as much emphasis as the other two. The Labor Department will release its report on Friday, and the weekly jobless-claims report comes out every Thursday. That's part of the reason investors didn't react too strongly to the ADP news, which reported 175,000 new jobs, compared with the estimate of 185,000. ADP also revised its December figure from 238,000 down to 227,000.

As for the Dow, the majority of its components -- 17 of 30 -- actually finished the day in the black. But the Dow is a price-weighted index, so the 0.83%, 1.09%, and 1.18% drops at Goldman Sachs (GS 0.68%), United Technologies, and Chevron, respectively, outweighed the gains made by companies with lower share prices. Goldman's drop probably came in reaction to a pending investigation, as New York state's superintendent of financial services requested documents from Goldman and other financial institutions in relation to a possible act of collusion to fix key benchmarks used for currencies and interest rates around the world. If Goldman traders are found to have taken part, the company could end up on the hook for a big fine.  

Elsewhere in the market, two big technology names, Pandora (P) and Twitter (TWTR), are tanking in after-hours trading after reporting earnings.

Pandora finished the day with a 0.08% gain but has fallen more than 9.4% after-hours. Revenue hit $200.4 million on a GAAP basis, a 52% increase from a year ago. while earnings on a GAAP basis hit $0.04 per share, up from $0.01. Sounds great, but the company is also spending more money to get listeners as the competition in the streaming video arena has heated up. Spotify and Apple's iTunesRadio are two notable services that have moved into Pandora's market, and they obviously don't care that Pandora was there first and is the current market leader. Costs will probably only continue to rise in the future, and that's not something investors want to see.  

As for Twitter, the stock closed the day down 0.53%, but has plummeted by more than 17% in the extended trading period. In its first earnings statement as a public company, revenue jumped from $112 million to $243 million, but the company also lost $1.41 per share during the quarter, compared with a loss of $0.07 a year ago. On an adjusted basis, the company posted earnings of $0.02 per share, while analysts were expecting a loss of $0.02, but user growth during the quarter came in lower than expected. Finally, Wall Street wanted to see a total of 244 million users, while Twitter reported 241 million. That's a 30% increase from the same quarter last year, but it also indicates that user growth is slowing. While the company certainly has a great future ahead of itself, investors will have to be patient, as today's decline proves that expectations for the company were set way too high.

Matt Thalman owns shares of Apple. The Motley Fool recommends Apple, ADP, Chevron, Goldman Sachs, Pandora Media, and Twitter and owns shares of Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$34,347.03 (0.45%) $152.97
Goldman Sachs Stock Quote
Goldman Sachs
GS
$388.86 (0.68%) $2.61
Pandora Media, Inc. Stock Quote
Pandora Media, Inc.
P
Twitter Stock Quote
Twitter
TWTR

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