Between a multi-year low number of initial unemployment claims last week and better-than-expected wages for Q1, the Federal Reserve’s got a little more motivation to raise interest rates sooner than later… and investors aren’t happy about it.
The S&P 500 sank sharply today, closing at 2085.51, down 1%.
Still, it was much worse for a few stocks, including Alcatel Lucent SA (ADR) (NYSE:ALU), Nokia Corporation (ADR) (NYSE:NOK) and Yelp Inc (NYSE:YELP).
Here’s what so harshly up-ended these three tickers on Thursday.
Yelp Inc (NYSE:YELP)
Looks like people are becoming less and less interested in what other people think about a nearby restaurant, store, or hotel. And shareholders of crowd-sourced review site Yelp paid the price for it today.
Last quarter, Yelp didn’t produce as much revenue or as much of a profit as analysts were expecting. Revenue of $131 million fell short of the estimated top line of $137.4 million, while the loss of two cents missed the expected profit of one cent per share of YELP.
What really spooked the market, however, was another slowdown in the growth rate of the site’s repeat visitors. The figure is still getting bigger, to be clear, with the number of unique monthly visitors rising by 8% in the first quarter. That’s a stark slowdown from the 13% growth in unique monthly visitors in the previous quarter and an alarming slowdown from the 30% growth rate seen in the same quarter a year earlier.
When all was said and done, YELP finished the day down more than 23%.
Nokia Corporation (ADR) (NYSE:NOK)
Nokia saw the value of NOK stock plunge more than 12% on Thursday after reporting last quarter’s results. While revenue for its primary division, networking, was up 15% in the first quarter of its current fiscal year, operating earnings fell a sharp 61% year over year. As it turns out, hardware is less profitable than software, in terms of margins.
While sales as well as adjusted earnings per share of NOK were up compared to its Q1 2014 results, Nokia’s earnings were flat compared to expectations. Overall revenue was 12% stronger than anticipated for the first quarter of this year.
The fact that Nokia met earnings estimates and topped sales estimates leaves one to wonder what the market was surprised about when the networking revenue and operating income figures were unveiled.
Alcatel Lucent SA (ADR) (NYSE:ALU)
To understand why Alcatel Lucent shares plunged more than 11% today, one only has to look at the miserable performance of NOK shares.
Less than two weeks ago, Nokia finally struck a deal to acquire Alcatel Lucent, a French networking hardware and software company, at a value of $16.6 billion… sort of. The deal simply called for an exchange of 0.55 shares of NOK for every one share of ALU. The math simply worked out to suggest a value of $16.6 billion at the time.
Problem: Since the value of every share of Alcatel Lucent is now — barring any last-minute cancellations of the agreement — completely and unequivocally synchronized with the value of Nokia shares, if NOK stock crashes, so too will ALU.
The merger has been and continues to be a contentious one, with some Alcatel Lucent shareholders still fighting it for the very reason that became a harsh reality today.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
