What started out as a very bullish day certainly didn’t end that way. After bouncing back as much as 1.3%, the S&P 500’s close of 2,051.31 today was only 0.23% better than Wednesday’s close. Traders became skeptical of China’s rebound, not to mention the one that U.S. stocks made.
At least the broad market finished the day in the black. For Intel Corporation (NASDAQ:INTC), Sprint Corp. (NYSE:S) and Coty Inc. (NYSE:COTY), it was nothing but red ink.
Here are the details on today’s worst stocks.
Coty (COTY)
Cosmetics company Coty is acquiring brand names Clairol, Covergirl, and several others from Procter & Gamble Co. (NYSE:PG) in an effort grow its business. But, judging from the 5% loss COTY shares booked today, investors aren’t happy with the terms of the deal.
The deal, which is worth about $15 billion after equity grants and factoring in debt, will add $5.9 billion worth of sales to Coty’s top line, which reached $4.5 billion last year.
As far as deals go, the math of this one is palatable enough; Coty is only paying a little more than a typical two times the P&G beauty division’s sales. Better yet, because Coty is tapping into so-called Reverse Morris Trust transaction laws, the acquisition will be minimally taxable to current Procter & Gamble.
So why the stumble from Coty? One theory is, neither Coty nor Procter & Gamble’s beauty business have exactly been red-hot lately, and the purchase may end up being little more than an expensive headache.
It’s also possible, however, that there’s simply a bit of “buy the rumor, sell the news” effect in play here.
Intel (INTC)
It’s not exactly a big secret that computer chip maker Intel — in addition to its peers — have been facing a headwind as the world migrates to tablets that don’t favor Intel hardware. Seeing a reminder of these woes in print, however, managed to inspire another round of selling.
The fear surrounding INTC was rekindled by reports that Bernstein Research still sees significant problems ahead. Namely, the research firm believes “incremental reports of both process and product delays” and recent layoffs merit a lowered earnings outlook for Q2’s numbers, which will be posted on July 15.
With yet-another analyst concerned that Intel remains overestimated even after a series of well-reasoned bearish cases, INTC fell nearly 2% on Thursday, reaching new 52-week lows.
Sprint (S)
As if Wednesday’s bearish woes weren’t enough, Sprint was sucker-punched again on Thursday, with S shares falling another 1.5%. After Wednesday’s and Thursday’s setback, Sprint stock is down 13% for the week so far.
The bulk of the damage to S stock this week was spurred by Wednesday morning’s comments from MoffettNathanson LLC’s Craig Moffett, who mentioned on CNBC that he and his firm felt Sprint was in financial distress, with cash drying up fast. T-Mobile US (NYSE:TMUS) CEO John Legere put the nail in the coffin today by suggesting that his company will soon displace Sprint as the country’s third-biggest wireless carrier, if it hasn’t already done so.
True or not, it was enough to keep S investors thinking, worrying — and most importantly — selling.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
