Image source: SolarCity.
Wednesday was a poor day for stock market investors, who had to deal with ongoing fallout from the terrorist attacks in Brussels and new concerns about the sustainability of the recent bounce in crude oil prices. The Dow Jones Industrials fell about 80 points, and broader-market weakness was largely concentrated in the materials and energy sectors that had led the rally during February and the opening part of March. Helping to lead the pullback were SolarCity (SCTY.DL), Hooker Furniture (HOFT -0.66%), and Amaya (NASDAQ: AYA).
SolarCity dropped almost 10% despite announcing late Tuesday a new provision for solar project financing. The residential solar giant said its new tax equity fund will provide money for more than $131 million in residential, commercial, and military solar projects. Although SolarCity chose not to reveal the funding source, the fund should help cover capital costs for installation.
That business model has been the backbone of SolarCity's growth, but some investors remain nervous about adverse trends in some states that have put up barriers to further expansion of residential solar. In particular, traditional utilities have advocated restrictions on net-metering laws that would have the impact of reducing the financial incentives available to homeowners and other power-users to install solar power systems. Until SolarCity can establish an effective defense against the regulatory threat, its stock could remain at relatively low levels.
Hooker Furniture also declined 10% in the wake of getting a downgrade from analysts at BB&T Capital Markets. The furniture company had successfully reached the analyst company's price target on its stock, and before today's drop, Hooker Furniture stock had jumped nearly 50% since early January. Interest in the company has been on the rise ever since hedge fund Cerberus Capital revealed it had taken about a 5.4% stake in the home-furnishings specialist, and improvements in operating margins and net revenue have also made investors aware of the opportunity in Hooker Furniture. If the U.S. economy remains strong, then Hooker Furniture appears to be in a good position to take advantage. After such a strong share-price advance, pullbacks are inevitable, but this one doesn't seem to change the investing thesis for the company.
Finally, Amaya plunged 22%. The Canada-based provider of products and services for the gaming and interactive entertainment industries gave up ground after CEO David Baazov was charged with insider trading. The Quebec provincial securities regulatory agency filed charges against Baazov and other individuals, alleging inappropriate use of information between late 2013 and mid-2014. The CEO denied the charges, and Amaya said it doesn't expect any change in its daily operations as a result of the allegations. Nevertheless, with some investors hoping Baazov's planned leveraged buyout of the company for C$21 per share would go through, the insider trading case could create some obstacles despite the CEO's assertions that he still wants to go forward.
