Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of RetailMeNot, Inc (NASDAQ:SALE) continued to fall today, dropping as much as 11%, and finishing down 5%, on concerns about its search engine relevance.
So what: Shares of the online coupon marketplace fell 19% yesterday, and continued to slide today after a report by SearchMetrics found that an update Google made to its algorithm earlier this week had dropped RetailMeNot by 33% in Google search rankings. Today, Stifel downgraded the coupon seller to hold, saying it believes that 20% of RetailMeNot's search traffic has been negatively affected, and that the company's revenue and EPS will see a significant impact.
Now what: RetailMeNot issued a statement yesterday defending itself, saying it believes the reports "greatly overstate the impact" on the company, and that it's too early to judge any potential from the change. A majority of RetailMeNot's traffic comes from search engines, so even a 20% drop, as Stifel projected, could be damaging. RetailMeNot did not update its financial guidance, as management did not believe it needed to, but the two-day sell-off seems proof that concerns about the change in the search algorithm aren't going to go away easily. I'd stay away from the stock until we know the effects of Google's update.
Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends Google (C shares) and RetailMeNot. The Motley Fool owns shares of Google (C shares). Try any of our Foolish newsletter services free for 30 days. 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.