Though neither day by itself nor the two-day stretch as a whole has done mortal damage to the market, it is worth noting that Tuesday and Wednesday are together the worst two-day span seen for stocks since late January.
A few more support levels still need to be broken before hitting the panic button just yet, though.
While participation in Wednesday’s pullback was fairly widespread, Veeva Systems Inc. (NYSE:VEEV), Alcoa Inc. (NYSE:AA) and TriNet Group Inc. (NYSE:TNET) did more than their fair share of damage. Here’s why the market made a point of hating them.
Veeva Systems (VEEV)
One would think the combination of an earnings beat, guidance that was in line with estimates, and news of an impending, important acquisition would spur a stock higher. One would be wrong, however, if thinking that about cloud computing name Veeva Systems. Very, very wrong.
Last quarter, the cloud-based specialty software provider grew its operating profit by 71%, posting income of 12 cents per share of VEEV stock, and topping estimates of a profit of nine cents per share.
Veeva Systems added that it was expecting between $87 and $88 million per share in revenue for the current quarter, and looking for a profit of ten cents per share. The profit outlook was better than the consensus outlook for nine cents per share of VEEV stock, and the revenue outlook was in line with current estimates. Both figures were significantly stronger than the year-ago comparables.
So why was VEEV stock down 21% on Wednesday? The impending acquisition of Qforma CrowldLink got the bulk of the blame, but more realistically, it was plain-old disappointment in its trailing and forward-looking numbers. For some investors, a mere “meet” is the same as a “miss.”
TriNet Group (TNET)
By most accounts, TriNet Group shares should have been up today following the release of last quarter’s numbers after the close on Tuesday. In the fourth quarter of 2014, revenue grew 25%, adjusted income grew 12%, and the total number of employees under its umbrella of HR and payroll services was up 25%. Yet, the 10% tumble from TNET today clearly says the market is worried.
What gives?
Deutsche Bank may be the culprit, as it lowered its price target of TNET from $40 to $35. At the heart of Deutsche Bank’s concern regarding TriNet Group were rising medical claims costs, which grew much faster last quarter than had been previously projected.
Alcoa (AA)
When it rains it pours, at least if you’re an aluminum company.
Yesterday afternoon, Merrill Lynch downgraded Alcoa as well as Century Aluminum Co. (NASDAQ:CENX) due to a pessimistic price forecast for the aluminum. Merrill strategist Michael Widmer specifically noted:
“We previously forecast a global deficit of ~1 Mt in 2015 estimates assuming China would not be a material net exporter. Yet Chinese exports have exceeded our expectations, and now imply a global 1 Mt surplus. We cut the 2015 aluminum estimate 10% to US$1819/t or $0.82/lb and lower the premium $0.01/lb to $0.16 (latest spot $0.22).”
Not to be outdone by the competing brokerage house, his morning, Bank of America downgraded Alcoa from a “buy” to a “neutral” rating because of what it described as “worsening aluminum fundamentals.”
Between the two dire outlooks, pessimism regarding aluminum stocks like AA and CNEX went viral on Wednesday, with AA stock tumbling 4% as a result.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
