What a difference a day makes! After toying with the idea of record highs on Monday, the S&P 500 turned tail on Tuesday, falling 1.18% to end the session at 2,089.46.
And yet, today’s fall is something we have seen — and overcome — several times since February. Only time will tell if this stumble is destined to be any different than the previous ones (and let stocks finally dish out a more significant correction).
Leading today’s bearish charge were Motorola Solutions Inc. (NYSE:MSI), Baidu Inc. (NASDAQ:BIDU) and Sprint Corp. (NYSE:S), mostly thanks to analysts’ actions. Here’s what happened to them that’s worth a closer look.
Baidu (BIDU)
Not every analytical firm has soured on Baidu following last quarter’s disappointing earnings and equally disappointing Q2 outlook. Most analysts are seeing a few too many red flags, though, and a spate of resulting downgrades sent BIDU down by more than 4% on Tuesday.
All told, Chinese search site Baidu topped earnings estimates for Q1, profiting $1.22 per share. Quarterly per-share income for BIDU, however, fell for the first time in over four years when the company posted results last week.
The revenue outlook for the current quarter was also disappointing. The company is now looking for a top line of somewhere between $2.64 billion and $2.7 billion, versus an average expectation of $2.68 billion.
Mostly concerned about thinning margins, Jefferies, CICC, and JP Morgan all cut their rating on BIDU in the meantime. Jefferies’ analysts opined:
“Despite recurring investment, closing the loop of O2O transactions and driving monetization will prove challenging for Baidu without a strong payment tool, in our view. Baidu Wallet currently only has 26mn connected accounts, compared to 119mn Weixin Payment MAU and 190mn Alipay MAU.”
Motorola Solutions (MSI)
After more than two years’ worth of choppiness and a distinct lack of progress from the company, Goldman Sachs is finally throwing in the towel on Motorola Solutions. The investment bank’s research arm downgraded MSI from “neutral” to “sell” Monday evening, sending shares more than 3% lower on Tuesday.
At the heart of the concern was an accelerating shift towards the usage of cell phones by emergency responders, and away from the radio equipment that Motorola Solutions makes. Goldman’s analysts explained:
“[W]e see downside to both Street estimates and the multiple due to the public safety industry’s move to LTE, which started late last year and will ramp over the next several years.”
Sprint (S)
Given how mush wireless service provider Sprint has sacrificed and spent to wage a market-share war with competitors AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ), one would have thought there would be some sort of significant, measurable financial upside appearing by now.
You’d be wrong. The company’s fourth-quarter loss of six cents per share of S stock was worse than expected, and wider than the four-cent loss taken in the same quarter a year earlier. Meanwhile, revenue fell nearly 7%, to $8.28 billion.
The company did add 967,000 (net) subscribers last fiscal quarter. But, considering Sprint effectively had to give itself and its service away to win only a modest amount of new business, investors may now be wondering if the price war against much larger rivals is a lost cause that will ultimately hang the company.
S stock fell more than 3% on the quarterly numbers.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
