Most trading was on hold early Wednesday, as investors were waiting to glean what clues they could from the Federal Reserve’s recent meeting minutes. Most of that trading remained on hold after those minutes were publicly posted, though, as investors were still trying to figure out what — if anything — was worth responding to.
The only item of real interest was the possibility that the Fed might be a little less cryptic in the future about when and how rapidly interest rates might begin to rise. That possibility, however, wasn’t enough to shake stocks out of their current rut.
Of course, there were a handful of stocks today that would have been grateful to just remain in a rut. Boston Scientific Corporation (BSX), Tesla Motors Inc. (TSLA), and Synchronoss Technologies, Inc. (SNCR) were major losers on Wednesday, for a variety of reasons.
Tesla Motors (TSLA)
Perennial market darling Tesla Motors hit a pothole on Wednesday after Morgan Stanley (MS) analyst expressed concerns about — and slashed sales estimates for –– its Model X, which is now supposed to become available to drivers in the third quarter of the coming year.
Morgan Stanley analyst Adam Jonas believes the shape and design of the so-called “falcon wing” door (which opens vertically rather than horizontally) for the Model X has proven more difficult to build than first presumed. Tesla Motors CEO Elon Musk has responded with an explanation that the doors aren’t a particularly troubling issue, but that didn’t prevent Jonas from lowering his Model X sales forecast from 15,000 units to 5,000.
TSLA stock tanked nearly 4% on the obscure and potentially irrelevant observation from the Morgan Stanly analyst.
Synchronoss Technologies (SNCR)
SNCR stock tumbled more than 11% on Wednesday after Robert Baird downgraded Synchronoss Technologies from a neutral rating to an “underperform” rating.
At the heart of the Baird downgrade were valuation concerns. And, with a trailing P/E of 43 and a forward-looking P/E of 23, it’s a legitimate worry. On the flipside, the company has grown income at an average clip of 9.4% for the past five years, and analysts expect an earnings growth rate of 18.7% for the coming five years.
Whatever the case, Baird lowered its price target on SNCR stock from $47 to $42 — roughly where it’s trading now.
Boston Scientific (BSX)
Boston Scientific just can’t get a break. A day after the company reported the first U.S. surgery using its Symphion hysteroscopic tissue removal system had been performed, Johnson & Johnson (JNJ) filed a suit against Boston Scientific that could cost the company more than $5 billion.
The legal battle actually goes back to events that unfurled a decade ago. In 2004, Johnson & Johnson was prepared to acquire Guidant for $21.5 billion. The deal specifically said Guidant couldn’t solicit other bids. Boston Scientific, however, ended up buying Guidant out from under Johnson and Johnson to the tune of $25 million.
The core question is, did Guidant explicitly seek out and assist Boston Scientific as a suitor, or did Boston Scientific seek out Guidant on its own? Johnson & Johnson will argue in court that Guidant breached the no-solicitation clause of the contract.
BSX stock was down 4% following the news.
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As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
