Why lululemon athletica, Green Dot, and Walter Energy Tumbled Today

The stock market gained ground overall, but these three stocks fell sharply Monday. Find out why.

Dan Caplinger
Dan Caplinger
Apr 21, 2014 at 8:33PM

The stock market continued to rise on Monday, following up on last week's advance and setting the stage for what many believe could be another run toward all-time record highs. Although the earnings season has only just begun, initial indications show that a majority of the roughly 18% of the S&P 500 that has reported results for the first quarter has done better than investors had expected. Yet for lululemon athletica (NASDAQ:LULU), Green Dot (NYSE:GDOT), and Walter Energy (NASDAQOTH:WLTGQ), the Monday blues brought substantial losses, as the three stocks failed to join in the positive sentiment of their peers.

Source: lululemon athletica.

For lululemon athletica, today's 5% drop came more from a lack of news than any affirmative action the yoga-apparel retailer made. Last Thursday afternoon, lululemon made an analyst-day presentation, giving the company a chance to give its strategic vision as well as a chance to showcase new apparel. Yet investors left disappointed by the lack of high-level corporate analysis, which one analyst suggested was insufficient in terms of setting goals on finance, in-store service, or customer retention. Although lululemon did win lawsuits that had alleged misconduct in connection with the see-through yoga-pants scandal last year, the company desperately needs to reconnect with its once-loyal clientele in order to regain trust and avoid the fate of a once-trendy fad stock.

Green Dot fell 9%, following the downward trend of other money-services companies Monday. Although Green Dot largely avoided the plunge that plagued its industry peers after a low-cost retail giant announced that it would offer its own money-transfer services directly, investors considered the announcement over the weekend and concluded that the impact on Green Dot's services could also be substantial. With so few barriers to entry in areas like prepaid cards, Green Dot always faced the possibility that a large company would seek to encroach on its turf. If Green Dot can't find a way to bounce back from what could be a huge setback, then today's loss could be just the beginning of its longer-term woes.

alter Energy sank 8% as the metallurgical-coal specialist suffered another analyst downgrade this morning. Unlike some past calls, however, Walter Energy was specifically singled out in this morning's downgrade, with the analyst simultaneously upgrading another hard-hit coal stock. Walter Energy faces multiple challenges in the current environment for coal stocks, including negative free cash flow, a relatively lack of liquidity, and a pricing environment for metallurgical coal that few expect to improve in the near future. Even though international demand on the thermal side of the coal industry has helped improve some investors' assessments of coal stocks more generally, Walter Energy's reliance on met-coal will force it to wait until steel production levels start rising back to more normal levels.