This Week's 5 Dumbest Stock Moves
Feb 9th 2012 7:11PM
Updated Feb 9th 2012 7:12PM
Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. So let's do as I do every week and take a look at five dumb financial events from the past seven days that may make your head spin.
1. See you next fall
Shares of TripAdvisor (NAS: TRIP) fell nearly 15% yesterday after the company posted disappointing quarterly results.
The travel reviews website operator saw revenue climb 30% to $137.8 million, but earnings rose by a weaker-than-expected 19% to $0.16 a share. Making matters worse, TripAdvisor's conference call hinted at rising costs as the company spends heavily on search-engine marketing for traffic through 2012.
Benchmark Co. downgraded the shares on concerns over "increased spending levels, lower cost per click, and slower hotel traffic growth."
TripAdvisor was spun off less than two months ago, making this its first quarterly report as a standalone public company. Well, if first impressions are any kind of indication, this place may be a dump.
2. You can't be Sirius
Sirius XM Radio (NAS: SIRI) posted reasonable quarterly results yesterday. There was plenty to like in the numbers and in the satellite radio giant's comments during the conference call.
- Margins continue to improve, as adjusted EBITDA and free cash flow continue to grow faster than revenue.
- Sirius XM plans to introduce personalized music streams and on-demand programming later this year, a move that should boost the number of subscribers paying extra for online access.
- Some may have been disappointed with Sirius XM's guidance calling for 1.3 million net additions this year -- after tacking on 1.7 million accounts in 2011 -- but that's not too shabby considering the 12% price hike that kicked in last month.
Why did Sirius XM make it to the "dumb" list this week? Well, I think CEO Mel Karmazin blew it by keeping revenue guidance for 2012 at $3.3 billion. How can revenue only grow by "almost" 10% when subscriber growth is targeted to climb 6%, a 12% rate hike is going to kick in as members renew, and streaming perks should bump average revenue per user nicely higher?
The $3.3 billion revenue target was initiated five months ago, and that was before a stronger-than-expected fourth quarter in terms of new subscribers and improving auto sales. Analysts were already perched at $3.36 billion in revenue for 2012, but the premium radio provider didn't drive up to meet them.
Let's not take the company to task for the margin contraction. You never like to see adjusted earnings climb just 10% on a 42% top-line surge, but analysts were expecting that. Pushes like Sohu's into search and especially online video just don't pack the kind of wide profit margins that Sohu finds in its online gaming business.
However, Sohu's guidance is where the Chinese miracle begins to fall apart. The Internet portal is looking at an adjusted profit of $0.50 a share to $0.55 a share for the current quarter, less than half of what analysts were targeting. Sohu's revenue outlook is also short of where the pros were parked.
Yes, Groupon is growing quickly, but there are a few trouble spots that should keep bargain seekers from clicking the "buy" button.
For starters, active customers and gross billings are both growing faster than revenue. What does this mean? Well, a customer base growing faster than revenue means that Groupon is making less money per buyer over the course of the quarter. Gross billings -- essentially what Groupon makes before paying merchants to arrive at its own revenue -- growing faster than revenue implies that Groupon is giving its 250,000 merchants better revenue splits.
There are also ominous sequential implications behind Groupon's revenue guidance for the current quarter, which basically amounts to a 1% to 8% increase over the fourth quarter. Despite the seasonal nature of the holiday quarter, sequential revenue during last year's freshman quarter climbed a robust 72%.
The wireless-chip specialist sees adjusted earnings clocking in between $0.01 a share and $0.03 a share, and Wall Street is forecasting profitability at the high end of $0.03 a share. TriQuint's revenue outlook is actually healthier than what analysts are projecting, but that also hints at the declining gross margins that reared their troublesome heads during its most recent quarter.
At the time this article was published Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.The Motley Fool owns shares of TripAdvisor and TriQuint Semiconductor. Motley Fool newsletter services have recommended buying shares of Sohu.com. 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.
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