An encouraging job growth number wasn’t enough to give stocks a serious bullish jolt on Wednesday, as the market continues to struggle with its recently-developed overbought condition.
Payroll processor ADP reported today that it saw job growth of 230,000 payrolls last month versus a growth pace of 225,000 for September. It’s an encouraging omen of what to expect when we get the (more) official job growth and employment figures from the Department of Labor on Friday. Investors weren’t particularly impressed, however, and in the cases of Stratasys (SSYS), SolarCity (SCTY) and Zulily (ZU), the market was decidedly worried about what the future may hold.
Stratasys (SSYS)
The mania surrounding the advent of affordable 3D printers may have made Stratasys one of the market’s most beloved names in 2012 and 2013. This year hasn’t been nearly as kind to SSYS stock, though. Shares are down 21% year-to-date thanks to today’s 11% plunge.
The catalyst for the catastrophe today was weak guidance. Although the 3D printer manufacturer (and additive maker) managed to beat its third quarter earnings estimates of 57 cents per share by posting a profit of 58 cents, Stratasys counteracted the encouraging news by lowering its full-year guidance. The company now expects to turn a net profit of somewhere between $2.21 and $2.31 per share of SSYS stock, down from previous outlooks for a profit of $2.25 to $2.35 for 2014.
Although the average analyst estimate for the full-year was $2.30 — within the stated guidance range — Stratasys is one of those companies where a lack of good news has the same effect as bad news,.
Zulily (ZU)
Online retailer Zulily saw its stock tumble 21% on Wednesday despite its earnings beat for the third quarter. The company posted a profit of 2 cents per share of ZU stock vs. analyst expectations for a loss of 3 cents per share. Zulily broke even in the third quarter of 2013.
The big setback for the stock wasn’t driven by result, but rather, concerns that its customer growth pace is slowing, and the trend can’t be stopped. Justin Post of Bank of America explained in his note to investors regarding his lowered price target on ZU:
“Active customer growth decelerated to 72% y/y (from 86% in 2Q) as marketing comps from 3Q13 were difficult and Zulily experienced some e-mail delivery issues, resulting in a modest 3Q marketing pullback. Zulily maintained its 2014 rev/EBITDA outlook despite its big EBITDA beat and we view the unchanged 2014 outlook as a relative positive given widespread downward estimate revisions across the eCommerce sector this reporting season, but Street was likely looking for upside given recent upbeat analyst day and a premium stock valuation multiple.”
SolarCity (SCTY)
Although SolarCity won’t report last quarter’s results until after the market closes on Wednesday, the market clearly doesn’t expect to hear good news, or see a bullish post-earnings response to the report. SCTY stock fell 5% today, and is back in the red for the year as a result.
As of the latest look, analysts are expecting SolarCity to post a loss of $1.11 per share of SCTY stock on revenue of $60.2 million. That projected top line is bigger than the year-ago figure of $48.6 million, but the expected loss is wider than the year-ago bottom line of a 43 cent loss.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
