Why Yelp Inc. (YELP), Twitter Inc. (TWTR) and Level 3 Communications, Inc. (LVLT) Are 3 of Today’s Worst Stocks

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The Federal Reserve says the economy is on the right track and will eventually merit a rate hike … but not just yet. In other words, nobody really knows anything for sure.

No news was good news for stocks, though, with the S&P 500 climbing 0.73% on Wednesday to end the session at 2,108.57.

Why Yelp Inc. (YELP), Twitter Inc. (TWTR) and Level 3 Communications, Inc. (LVLT) Are 3 of Today's Worst StocksIt wasn’t a banner day for all stocks, however. Twitter Inc. (NYSE:TWTR), Level 3 Communications, Inc. (NYSE:LVLT) and Yelp Inc. (NYSE:YELP) all got crushed thanks to disappointing earnings reports and disappointing guidance. Here’s what happened.

Twitter (TWTR)

Still licking its wounds from its last quarterly earnings report, Twitter took another big hit today. Though the micro-blogging company did better than expected in terms of sales and earnings, the ongoing slowdown in user growth sent TWTR spiraling 14% lower.

All told, Twitter earned seven cents per share on $502.3 million in sales, topping estimates for a profit of only four cents per share of TWTR and $481.2 million in revenue. The top line was up 61% on a year-over-year basis, while earnings soared from the two cents per share the company earned in the second quarter of 2014.

But, the company’s active monthly users for the second quarter were only 3% stronger than the prior quarter’s headcount, and up only 15% on a year-over-year basis. That’s the weakest growth rate TWTR investors have seen yet.

Level 3 Communications (LVLT)

The good news: Level 3 Communications topped its second-quarter earnings estimates. The bad news: That’s the only good news that could be said of last quarter’s numbers. Disappointed shareholders sent LVLT down nearly 6% on Wednesday.

During the second quarter of the year, telecom service provider earned an operating profit of 42 cents per share on $2.06 billion. Analysts were only looking for earnings of 39 cents per share of LVLT, but also expected revenue of $2.08 billion. On a GAAP-basis, though, the loss of $13 million was more than LVLT shareholders could handle. Though the company booked the loss because it wanted to shed some debt from its balance sheet, the market doesn’t believe it was money well spent.

Yelp (YELP)

Last but not least, online-review site Yelp saw its stock crash to the tune of 25% on Wednesday after a poor quarter and even poorer outlook prompted a wave of downgrades and lowered price targets.

Revenue of $133.9 million rolled in slightly higher than expected for the second quarter, but the loss of two cents per share fell short of the expected one-cent profit the pros had modeled.

Worse, the company made the decision to phase itself out of display advertising — and lowered its third-quarter guidance in the meantime. Now Yelp expects the Q3 top line to come in between $139 million and $142 million, versus a consensus of $152.6 million.

Downgrades followed — seven in all, including one to an “underperform.”

B. Riley & Co analyst Sameet Sinha accurately summed the situation up by saying:

“They had terrible two quarters. Then they tried to sell themselves (and) nobody would buy them. And then they come out and say that they are getting out of (display advertising) and reducing guidance. Basically its sign of that things are really wrong at this company.”

No wonder Yelp investors fled for the hills.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/07/yelp-inc-yelp-twitter-inc-twtr-level-3-communications-inc-lvlt-3-todays-worst-stocks/.

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