Investors remain on the fence, getting Wednesday started on a bullish foot, then taking stocks deep into the red by midday, only to close out on a more modest bearish note. When all was said and done, the S&P 500 ended the session at 2,047.62, down 0.77.
Not every name posted merely modest losses, though. Costco Wholesale Corporation (NASDAQ:COST), SunPower Corporation (NASDAQ:SPWR) and Yahoo! Inc. (NASDAQ:YHOO) each used more than their fair share of red ink during today’s session. Here’s what investors need to know.
Yahoo! Inc. (YHOO)
Rather than spin off its stake in Alibaba Group Holding Ltd (NYSE:BABA) and risk creating a massive tax bill, Yahoo! has decided to try a different approach — it’s going to spinoff everything currently under the YHOO umbrella except Alibaba. The maneuver is considerably more complicated than the BABA spinoff would have been, but it’s a maneuver that would come with a much smaller tax liability.
It’s not quite what YHOO owners were expecting, and worse, the decision only delays the split the market’s been hoping would have happened already.
The bulk of the reason YHOO shares lost only a little more than 1%, though, may have been something Chairman Maynard Webb didn’t say during Wednesday’s conference call to explain the new plan.
Rather than simply divest the company’s core Internet operation, Webb alluded to a continued turnaround effort. Investors have little faith left that the company is capable of doing that, however, and some were hoping Yahoo! would simply sell its web operation to one of the allegedly interested suitors.
YHOO shares may have only lost about 1% on Wednesday, but they did so on enormous volume, with most of the shares exchanging hands at a price much lower than the closing price of $34.40
Costco Wholesale Corporation (COST)
Costco Wholesale may have seen top-line growth last quarter, largely thanks to the rising U.S. dollar, but earnings fell short of expectations for the prior quarter, sending COST shares more than 5% lower. All told, Costco posted a profit of $1.09 per share on revenue of $27.2 billion in its fiscal first quarter. Analysts, however, were calling for a top line of $27.7 billion and earnings of $1.17 per share of COST.
With a third of its stores located overseas and the price of the gasoline it sells at its service stations plunging in the past year, at least some of the weakness has to be overlooked.
On the other hand, membership fee revenue only grew 1.9% last quarter … the slowest growth rate the company has seen on that front in years. It’s a concern to COST owners not only because fee revenue is a key source of overall revenue, but because fewer paying members now means there will be fewer shoppers later.
SunPower Corporation (SPWR)
Last but not least, SunPower somewhat blindsided SPWR shareholders last night, announcing after the market closed on Tuesday that it would be issuing $350 million worth of convertible debt for “general corporate purposes.”
Though the terms of these debentures have yet to be fully determined, they often favor the debt-buyers while putting existing shareholders at something of a disadvantage. And, given the struggles most solar-power players have faced this year, it’s not a stretch to think the need for this degree of funding is an subtle signal that SunPower Corporation is hitting a bigger headwind than most investors might recognize.
SPWR finished the day down 8%.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
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