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Why First Solar, DigitalGlobe, and DreamWorks Animation Tumbled Today

By Dan Caplinger - Feb 26, 2014 at 8:31PM

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Wednesday's stock market action disappointed bulls looking for new record highs, but the performance of these three companies was much more troubling. Find out what sent these stocks downward today.

Early Wednesday, it appeared that the S&P 500 might head for a new all-time record high. A late-day pull back caused stocks to give back most of their gains for the day, although major-market benchmarks still poked barely into positive territory. For First Solar (FSLR 4.75%), DigitalGlobe (DGI), and DreamWorks Animation (DWA), however, investors weren't as lucky as the stocks suffered substantial losses.

First Solar fell 9% after the solar giant's earnings report last night didn't meet up to what investors had hoped to see. Both past and future results led to tough questions for the utility-solar specialist, with the particular concern being First Solar's estimate of current-quarter earnings to come in around 30% to 40% below investors' expectations. The concern for First Solar is that for the most part, it has ceded the residential solar market to competitors SunPower (SPWR -0.17%) and SolarCity (SCTY.DL). As long as First Solar can keep finding big-project customers, it should fare OK, but pressure on sales suggests that its efforts might not be sufficient.

DigitalGlobe plunged 27% after the mapping and imagery specialist announced its earnings results as well as an acquisition. Fourth-quarter revenue jumped 35%, but earnings-per-share fell by half on a large increase in share counts. Moreover, sales guidance of $630 million to $660 million for 2014 represents just 3% to 8% growth, hardly giving DigitalGlobe investors the assurance they'd prefer that the company will keep moving in the right direction. Moreover, without knowing the terms under which DigitalGlobe acquired energy-industry digital-imagery specialist Spatial Energy, it's hard to assess whether the acquisition will be positive or negative to DigitalGlobe's overall prospects.

DreamWorks dropped 12% following the studio's earnings report, which included a 23% drop in revenue due largely to poor DVD sales of its Turbo release. Bulls pointed to some improvement in the company's television segment, as DreamWorks tries to follow Disney's lead in becoming a broadly diversified entertainment company. Nevertheless, DreamWorks is pinning its hopes on the sequel to How to Train Your Dragon as well as the new Mr. Peabody & Sherman release. If those features pan out well, then DreamWorks could make back the ground it has lost from Turbo's surprisingly poor performance.

Dan Caplinger owns shares of Walt Disney. The Motley Fool recommends DigitalGlobe, DreamWorks Animation, SolarCity, and Walt Disney and owns shares of SolarCity and Walt Disney. Try any of our Foolish newsletter services free for 30 days. 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

First Solar, Inc. Stock Quote
First Solar, Inc.
FSLR
$106.74 (4.75%) $4.84
SunPower Corporation Stock Quote
SunPower Corporation
SPWR
$24.04 (-0.17%) $0.04
DreamWorks Animation SKG Inc. Stock Quote
DreamWorks Animation SKG Inc.
DWA
DigitalGlobe, Inc. Stock Quote
DigitalGlobe, Inc.
DGI
SolarCity Corporation Stock Quote
SolarCity Corporation
SCTY.DL

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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