Despite the rough start, the bulls managed to fight their way back to near-breakeven levels on Tuesday. By the time the closing bell rang, the S&P 500 had climbed back from a 0.94% loss early in the day to a loss of only 0.29% by the close.
Not every stock was able to reverse such a misfortune, however. Rackspace Hosting, Inc. (NYSE:RAX), Orexigen Therapeutics, Inc. (NASDAQ:OREX) and Gap Inc. (NYSE:GPS) all finished the day deep in the red. Here’s what happened.
Orexigen Therapeutics (OREX)
The ink didn’t even have a chance to fully dry on last week’s encouraging first quarter earnings report from Orexigen Therapeutics before Murphy’s Law kicked in and upended OREX shares on Tuesday.
As it turns out, the potential heart benefit the Orexigen Therapeutics weight-loss drug Contrave is supposed to offer — the one that catapulted OREX shares from $5.79 to $8.49 over the course of March 3rd and March 4th — may do nothing of the sort.
According to a press release from the Cleveland Clinic, which was performing the follow-up trial of Contrave as a means to staving off heart problems, the previous data posted by Orexigen on the matter was misleading, in that any of the meaningful measurable heart benefit of the drug observed in the study’s early phases were wiped away as the trial progressed.
The bulk of today’s 13% selloff from OREX, however, may have ultimately been driven by accusation that the company tried to suppress the damning new data.
Rackspace Hosting (RAX)
Some observers are calling today’s 14% stumble a mere hiccup after Rackspace Hosting shared a disappointing Q2 outlook. Other analysts are assuming the letdown is a microcosm of a much bigger problem for RAX, leading to downgrades of the stock.
First-quarter results for the web-hosting company were fine, arguably even good. Rackspace posted earnings of 20 cents per share of RAX (in line with estimates), on the heels of a 9% upswing in net income. Revenue was up 14% on a year-over-year basis.
The prod for the pullback was the outlook for the current quarter. Now Rackspace Hosting is only expecting an improvement on the order of 1.5% to 2.5%. That’s considerably weaker than the top line analysts had been looking for.
Gap (GPS)
The frothy value of the U.S. dollar has been a common complaint made over the course of Q1 earnings season thus far, but few companies have been as adversely impacted by it as Gap was.
Though not the official quarterly report, the retailer informed investors today that Q1’s net sales were off 3% on a year-over-year basis. That should translate into a profit of between 55 cents and 56 cents per share of GPS — as expected — when Gap files its first quarter numbers with the SEC later this month. The projected revenue of $3.66 billion, though, is short of the estimated top line of $3.76 billion.
The company specifically pegged a relatively weak Japanese yen and Canadian dollar for the soft results, though Gap also acknowledged that sales still would have fallen 1% had currency values remained stable.
GPS stock was off nearly 4% on the news.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
