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This Week's 5 Dumbest Stock Moves

By Rick Munarriz – Mar 28, 2014 at 4:48PM

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These five companies got it wrong this week.

Stupidity is contagious -- even respectable companies can catch it. As we do every week, let's take a look at five dumb financial events this week that may make your head spin.

1. King gets dethroned
King Digital Entertainment (KING.DL) went public with plenty of fanfare on Wednesday but ultimately had more fans than fares. The company behind Candy Crush Saga priced its IPO at $22.50, but the debut on Friday fell like many potential kings on Game of Thrones

King's problem wasn't just the Zynga-licious fears that burned investors of the last casual-gaming darling that fizzled out. Many of its performance metrics had dipped sequentially between the third and fourth quarters of last year, fueling fears that King's popularity had already peaked last summer. 

King needs to show either sequential growth in the current quarter or put out a second hit if it wants to avoid becoming another busted IPO in the future.

2. Rack 'em up 
Rackspace (RAX) has closed lower in six of the past seven trading days, and it's not just the weak-kneed tech stocks fueling the slide. Tech giants are crashing its party with ridiculous cutthroat pricing.

The Web hosting provider has been a popular stock because of its healthy reputation providing traditional and cloud-based hosting, but it's hard to compete against the world's largest search company and the country's most popular e-commerce player moving to make their cloud-based solutions even cheaper. That's exactly what happened this week. 

3. Game off
The video game industry may have gotten a spark with November's rollout of the Xbox One and PS4, but the surge in low-margin hardware sales isn't translating into sales of higher-margin software and pre-owned wares at GameStop (GME 0.65%).

The video game retailer posted disappointed quarterly results on Thursday, missing Wall Street's profit target for the first time in ages. GameStop's forecast is also less than rosy. The small-box chain is eyeing a profit of $3.40 a share to $3.70 a share for the new fiscal year, shy of the $3.76 a share that the pros were projecting

GameStop shares nearly doubled last year on excitement surrounding the new consoles hitting the market, but now the stock has shed 24% of its value in 2014.

4. Seas the day
SeaWorld (SEAS 0.62%) would love to be generating attention for the "Sea of Surprises" celebration that it unveiled this week as all of its parks commemorate the original SeaWorld in San Diego opening 50 years ago, but now it has to deal with questions about why Blackstone is bailing again.

The firm that took SeaWorld public last year had sold 18 million shares just three months ago. Sluggish attendance and negative backlash surrounding last year's Blackfish documentary aren't helping, but it ultimately isn't a good thing if the investor that took you public is scrambling out of its controlling stake. 

5. There's no renaissance at this festival
Some companies just miss badly when it comes to living up to expectations. SFX Entertainment (NASDAQ: SFXE) tumbled 12% on Thursday after posting disappointing financial results

The music festival promoter posted a steep loss on $84.2 million in revenue for the quarter. Analysts were holding out for a small profit and $112.9 million in revenue. If you miss this badly on both ends of the income statement, it's not really a surprise to see the market turning down the volume.  

Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Rackspace Hosting and owns shares of GameStop. We Fools may not 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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