What started out as a bullish day sure didn’t finish as one. The S&P 500 ended Friday at 2055.47, down 0.34%, peeling back from the brink of a break to new multi-week highs.
Leading the bearish charge were GoPro Inc. (NASDAQ:GPRO), Yelp Inc. (NYSE:YELP) and Pandora Media Inc. (NYSE:P), prompted by poor results, and further spurred by analyst concerns.
Yelp (YELP)
Business-review website Yelp seems to be losing its appeal, and judging from the 21% tumble YELP stock took today, traders aren’t happy about it.
In the fourth quarter of last year, the number of unique visitors than came to Yelp fell 3% from the third-quarter headcount. While not a drastic slide, knowing that all big trends start out as small ones, investors were understandably worried. That worry turned into our right alarm, however, when Yelp announced it would also be spending more on marketing this year in order to shore up its declining user base.
That news led to a string of downgrades of YELP stock, including from Pacific Crest’s Evan Wilson, who wrote:
“Yelp remains at the crossroads of exciting Internet themes, but is clearly closer to realizing its full potential (without big spending) than we realized or that valuation supports. Potential user declines during the revenue deceleration and expense acceleration we’ve seen is a bad combination, especially when new opportunities (International and Platform) seem far away from contribution.”
Pandora Media (P)
Pandora Media managed to grow the top and bottom lines in the fourth quarter of 2014. But, it doesn’t expect to grow fast enough this year to suit owners of P stock, which fell 17% today on last quarter’s numbers and the 2015 outlook.
In the fourth quarter of 2014, Pandora Media generated revenue of $268 million, topping the year-ago figure of, but falling short of the $276.5 million the market was collectively expecting. Earnings of 18 cents per share of P stock were strong than Q4-2013’s bottom line of a four cent loss, and only in line with estimates of 18 cents.
The real killer for P stock on Friday, however, was slowing sales growth. Compared to ad revenue growth of 39.5% in the fourth quarter of 2013, the 2014 fourth-quarter advertising revenue growth rate of only 35.9% became a major red flag for many Pandora Media shareholders.
GoPro (GPRO)
If you thought the lockup overhang was a done deal for GoPro as of December 23, think again. That release was only for the first tranche of pre-IPO insider shares. Another swath of GPRO stock will become free-trading as of February 17th. Only this time, the end of the lockup isn’t being offset by the encouraging outlooks being batted around because of strong holiday demand.
The good news: GoPro earned an operating profit of 99 cents per share of GPRO stock (nearly tripling last year’s levels) on revenue of $634 million in the fourth quarter of last year. Analysts were only expecting income of 70 cents per share on $580 million in sales. The bad news: GoPro says it’s now expecting per-share profits for Q1 to roll in slightly lower than analysts had been expecting. The news prompted a flurry of lowered price targets from the analyst community, sending GPRO stock down nearly 14% for the day.
Pacific Crest Securities noted:
“GoPro is the leading action camera provider; however, coming out of the report, we remain skeptical of the company’s media monetization opportunities. Unit upside is nice, but optimism fueled by media opportunities has been the most notable driver of the multiple since the company went public. In light of only modest March quarter outperformance, combined with higher expenses and a persistent overhang of competitive risks, we believe the re-rating the stock will see is likely to remain for the next several quarters.”
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
