Netflix, Groupon Bomb — Tuesday’s IP Market Recap

by Kyle Woodley | November 22, 2011 4:47 pm

[1]Netflix (NASDAQ:NFLX[2]), in keeping with its seemingly monthly tradition of doling out bad news, gave investors more than they could stomach Monday with a pair of lousy announcements, leading its stock to drop off yet again Tuesday.

Netflix, which previously had warned that it would be unprofitable for a few quarters starting in 2012, drew its pessimism out across the whole year with the announcement that it would lose money from start to finish.

This news was coupled with the company saying it would sell $200 million worth of convertible bonds to Technology Crossover Ventures and $200 million in stock to T. Rowe Price’s (NASDAQ:TROW[3]) mutual funds and accounts. Netflix said it was raising cash[4] in an effort to buy more content for its video-streaming and DVD delivery service two months after it failed to renew a contract with media provider Starz.

The 2012 forecast and the announced fundraising — which puts Netflix in a dangerous Catch-22 of spending money to try to catch up with declining revenue — knocked NFLX shares down 5.4% by the end of trading Tuesday.

Hewlett-Packard (NYSE:HPQ[5]) offered up more fare for bad-news gluttons Monday by reporting disappointing fiscal Q4 earnings, then took a 5% dive early Tuesday before recovering to about $26.65, or down less than 1%, by the end of trading. HPQ beat analyst estimates with adjusted earnings per share of $1.17, but the company’s fiscal 2012 earnings forecast of $4 per share was far below Wall Street expectations. Hewlett-Packard is down almost 40% in the past 52 weeks, but investors should be wary of considering it a value buy[6].

One of the top blockbuster IPOs of the year[7], Groupon (NASDAQ:GRPN[8]), found itself hitting the rewind button Tuesday when it sank to $20.07 — just seven cents above its initial valuation of $20 when it went public Nov. 4. Groupon had been sitting mostly level for the past two weeks before shedding 10% Monday then another 15% today. Groupon’s faceplant came just after LinkedIn (NYSE:LNKD[9]) spent most of the Monday down about 7% on its lockup agreement expiring[10].

Three Up

• Gilead Sciences (NASDAQ:GILD[11]): Up 6.89% ($2.50) to $38.76.
• Youku.com (NASDAQ:YOKU[12]): Up 5.64% (82 cents) to $15.37.
• Melco Crown Entertainment (NASDAQ:MPEL[13]): Up 5.48% (46 cents) to $8.85.

Three Down

• Frontline Ltd. (NYSE:FRO[14]): Down 41.04% ($2.13) to $3.06. (Read more about Frontline here[15])
• Nokia (NYSE:NOK[16]): Down 7.64% (46 cents) to $5.56.
• Campbell Soup (NYSE:CPB[17]): Down 5.27% ($1.77) to $31.84.

As of this writing, Kyle Woodley did not hold a position in any of the aforementioned stocks. Check out our list of previous IP Market Recaps[18].

Source URL: https://investorplace.com/2011/11/netflix-nflx-groupon-grpn-hpq-fro/

---