Stocks were mixed on Thursday, as mixed economic data and mixed corporate earnings combined to make Wall Street hopelessly confused. With a few stocks, however, there was no confusion, and investors were entirely clearheaded about what to do with shares of Qualcomm (QCOM +1.29%), TripAdvisor (TRIP +1.74%), and Diamond Offshore Drilling (DO +0.00%). The three stocks sold off mercilessly, ending as three of the worst performers in the S&P 500 Index (^GSPC +1.20%) today. The S&P, for its part, added about one point, or less than 0.1%, which was enough to set a new record closing high for a second consecutive day.
Qualcomm posted a blockbuster quarter yesterday, easily topping both revenue and earnings-per-share estimates with ease. As you might imagine, it wasn't Qualcomm's stupendous quarter that had the stock selling off to the tune of 6.7% today. The chipmaker, whose ubiquitous chips go in mobile devices across the globe, also relies upon fees it receives for licensing out its technology for much of its growth. Unfortunately, Qualcomm's global ambitions make collecting royalties akin to pulling teeth, especially in one of its largest end-markets, China. China is notorious for disregarding patent law and stealing the designs and technologies of foreign countries and companies; yet the commercial opportunity of the country makes it impossible to ignore. Qualcomm lowered near-term outlooks due to foreseen difficulties in collecting royalties from its morally obtuse licensees in China.
TripAdvisor, while it also deals in international commerce, doesn't yet rely on China for a huge chunk of its business. While that's fortunate, shares still lost 5.2% Thursday after the travel-advisor website and service company reported earnings that fell well short of expectations. The silver lining for TripAdvisor investors is that sales are still on the rise and, after growing 31% last quarter, it beat expectations. The company, however, failed to keep its costs in check, as total costs and expenses rose a whopping 46%.
Located off the shores of Korea, this Diamond Offshore rig, dubbed "Ocean BlackLion" can drill to depths of 40,000 feet. Image Source: Diamond Offshore.
Finally, shares of contract driller Diamond Offshore Drilling fell 4.3% on Thursday, despite reporting an EPS of $0.65 against analyst EPS expectations for $0.56. Again, the plunging shares are the result of implications for the company's future rather than the company's past performance. Investors buy the future, and today, investors in Diamond Offshore Drilling saw a bleaker one, as one of the company's newest contracts with Murphy Oil reflects a troubling trend in offshore drilling. Day rates -- or the cost a client must pay to rent a rig's services for a day -- have been plummeting. A Cowen analyst noted that Murphy's option to extend its current contract with Diamond Offshore to a three-year, $485,000-per-day contract, was a far cry from recent contracts that called for between $550,000 and $600,000 each day during the three-year period.
