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Why GameStop, Aruba Networks, and The Gap Are 3 of Today’s Worst Stocks

Earnings and outlooks torpedoed GME, ARUN and GPS on Friday

A whole new round of overseas stimulus spurred U.S. stocks higher on Friday, even if the market peeled back from those impressive highs after the initial surge. Mario Draghi indicated he’d direct the European Central Bank to ramp up its purchases of assets, while China cut its key interest rate.

Neither measure proved to be a boost to GameStop Corp. (GME), Aruba Networks, Inc. (ARUN), or The Gap Inc. (GPS) today, however. These three key stocks were among the worst of the worst performers thanks to disappointing results and alarming guidance.

GameStop (GME)

Why GameStop Corp., Aruba Networks, Inc., and The Gap Inc. Are 3 of Today's Worst StocksGameStop didn’t do as well as the market was hoping it would in its third quarter this year. The video game retailer only earned 57 cents per share of GME stock, versus estimates of 61 cents. Revenue fell nearly a percentage point, to $2.09 billion. That was shy of the expected $2.2 billion. Same-store sales were off 2.3%.

The bigger reason GME stock tumbled 13% on Friday, however, was the weak guidance GameStop offered for the full year. The new expected range is a profit of somewhere between $3.40 and $3.55 per share, down from prior guidance of $3.40 to $3.70. Analysts had collectively been expecting $3.68.

Aruba Networks (ARUN)

Although Aruba Networks managed to top estimates for its first fiscal quarter, its fourth quarter outlook wasn’t satisfactory to investors.

Last quarter, Aruba Networks earned 26 cents per share of ARUN stock, compared to the average analyst outlook of 25 cents. The pros were also only looking for sales of $204.3 million, and the company posted a top line of nearly $208 million. That sales figure for its fiscal Q1 was 29% better on a year-over-year basis.

The trailing figures weren’t the reason ARUN stock took a 14% hit today, however. It was the Q2 outlook that undermined the stock’s value. For the current quarter, Aruba Networks anticipates sales of somewhere between $208 million and $212 million, while analysts were thinking, on average, $211.6 million. Those same analysts had also planned on a profit of 27 cents per share of ARUN stock, but the company indicated the Q2 per-share profit could roll on as low as 26 cents.

The Gap (GPS)

Although The Gap managed to pump up last quarter’s earnings by 2.7% on a year-over-year basis, the bottom line still fell short of analyst estimates. The company posted a Q3 profit of 74 cents per share of GPS stock, below analysts’ expectations of 79 cents. The bigger impasse for The Gap, though, was on the top line. Total sales fell about 0.1%, but last quarter’s revenue of $3.972 billion was 1.6% shy of the expected $4.04 billion.

The bigger reason GPS stock fell more than 4% on Friday, however, likely stemmed from its revised full-year profit outlook. The retailer now expects to post 2014 earnings somewhere between $2.73 and $2.78 per share of GPS stock, versus the average analyst estimate of $2.83.

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

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