The List of Momentum Stocks Gone Bad is Growing Rapidly (NFLX) (OPEN) (MCP) (SODA)
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One by one past momentum darlings have seen the air taken out of them. Below is a run-down of the recent dead momentum stocks and what has led to their decline.
Netflix (Nasdaq: NFLX) - down 57 percent from the highs. Once a company which could do no wrong in Wall Street's eyes, Netflix has had a spate of negative announcements which started with its price hike in July 2011. The price hike news was followed by disappointing second-quarter results and lower guidance. After that, Starz said it ended its contract renewal negotiations with Netflix. Not done yet: just last week the company lowered its third-quarter domestic subscriber guidance and Monday the company announced it was separating its DVD and streaming businesses.
OpenTable (Nasdaq: OPEN) - down 58 percent from the highs. While OPEN has been able to consistently beat the Street, that beat percentage has gone down precipitously. In the third and fourth quarters of 2010, the company was beating the consensus by more than 50 percent. However, in the first and second quarters of 2011 that percentage was down to just 20 percent. By the second quarter the company missed the top-line consensus by $1 million. Competition is heating up, including Google's (Nasdaq: GOOG) recent purchase of Zagat.
MolyCorp (NYSE: MCP) - down 47% from the highs. Skyrocketing rare earth prices, due to shortages from limited exports from the main producer China, sent shares of Molycorp into orbit. Now a steady decline in prices of the same minerals has sent shares reeling. Tuesday was the latest blow to the bull case after mega bull JPMorgan downgraded the stock to Neutral. JPMorgan cited the recent drop in rare earth prices, which the firm blame's on China rare earth oxide speculators - the same group that drove the run-up.
SodaStream (Nasdaq: SODA) - down 49% from the highs. Since its IPO, investors have compared SODA to Green Mountain Coffee (Nasdaq: GMCR), a tremendous success in the single-cup coffee market. SODA is trying to bring that same razor/razor blade model to home carbonated beverages. After quarter after quarter of crushing earnings result, second-quarter results brought with it a sober outlook. Muted guidance from a momentum high-flyer is a toxic combination. Shares have been in free fall since. Even uber-bull Jim Cramer turned his back on SODA after the sub-par guidance.
So what is the next momentum stock to go bust? Short sellers have their eyes on: Green Mountain Coffee Roasters Inc. (Nasdaq: GMCR), lululemon athletica Inc. (Nasdaq: LULU), priceline.com (Nasdaq: PCLN), InterDigital, Inc. (Nasdaq: IDCC), Chipotle Mexican Grill, Inc. (NYSE: CMG) and Universal Display Corp. (Nasdaq: PANL).
Netflix (Nasdaq: NFLX) - down 57 percent from the highs. Once a company which could do no wrong in Wall Street's eyes, Netflix has had a spate of negative announcements which started with its price hike in July 2011. The price hike news was followed by disappointing second-quarter results and lower guidance. After that, Starz said it ended its contract renewal negotiations with Netflix. Not done yet: just last week the company lowered its third-quarter domestic subscriber guidance and Monday the company announced it was separating its DVD and streaming businesses.
OpenTable (Nasdaq: OPEN) - down 58 percent from the highs. While OPEN has been able to consistently beat the Street, that beat percentage has gone down precipitously. In the third and fourth quarters of 2010, the company was beating the consensus by more than 50 percent. However, in the first and second quarters of 2011 that percentage was down to just 20 percent. By the second quarter the company missed the top-line consensus by $1 million. Competition is heating up, including Google's (Nasdaq: GOOG) recent purchase of Zagat.
MolyCorp (NYSE: MCP) - down 47% from the highs. Skyrocketing rare earth prices, due to shortages from limited exports from the main producer China, sent shares of Molycorp into orbit. Now a steady decline in prices of the same minerals has sent shares reeling. Tuesday was the latest blow to the bull case after mega bull JPMorgan downgraded the stock to Neutral. JPMorgan cited the recent drop in rare earth prices, which the firm blame's on China rare earth oxide speculators - the same group that drove the run-up.
SodaStream (Nasdaq: SODA) - down 49% from the highs. Since its IPO, investors have compared SODA to Green Mountain Coffee (Nasdaq: GMCR), a tremendous success in the single-cup coffee market. SODA is trying to bring that same razor/razor blade model to home carbonated beverages. After quarter after quarter of crushing earnings result, second-quarter results brought with it a sober outlook. Muted guidance from a momentum high-flyer is a toxic combination. Shares have been in free fall since. Even uber-bull Jim Cramer turned his back on SODA after the sub-par guidance.
So what is the next momentum stock to go bust? Short sellers have their eyes on: Green Mountain Coffee Roasters Inc. (Nasdaq: GMCR), lululemon athletica Inc. (Nasdaq: LULU), priceline.com (Nasdaq: PCLN), InterDigital, Inc. (Nasdaq: IDCC), Chipotle Mexican Grill, Inc. (NYSE: CMG) and Universal Display Corp. (Nasdaq: PANL).
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