Why Vale SA (ADR) (VALE), NetEase Inc (ADR) (NTES) and HP Inc (HPQ) Are 3 of Today’s Worst Stocks

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Inspired by better-than-expected durable orders for January (up 4.9% overall, and up 1.8% not factoring in transportation orders), the bulls took charge early on Thursday and maintained control all the way to the closing bell. The S&P 500 was up 1.13% today, ending the session at 1,951.70.

Why Vale SA (VALE), NetEase Inc. (NTES) and HP Inc. (HPQ) are 3 of Today's Worst StocksNot every name was a solid winner on Thursday, though. NetEase Inc (ADR) (NASDAQ:NTES), Vale SA (ADR) (NYSE:VALE) and HP Inc (NYSE:HPQ) each dipped deep into the red ink. Here’s what investors need to know.

NetEase Inc (ADR) (NTES)

The good news is, online-gaming service provider NetEase managed to top revenue estimates for its fiscal fourth quarter. That bad news is, that was the only good news about last quarter’s results, sending NTES down nearly 15% for the day.

In its fourth quarter of 2015, NetEase drove 7.9 billion yuan worth of sales, or $1.22 billion. That was a 128% improvement from the year-ago top line thanks to new business signed in the meantime, and handily topped estimates for a top line of 7.69 billion yuan.

Higher revenue isn’t necessarily leading to higher margins, however. In fact, gross margins slumped from 72% in the same quarter a year earlier and from 58% in Q3 to only 53% last quarter, as the continued growth of lower-margin mobile games makes it tougher to make a buck in the business.

The math of the mobile gaming business was enough to prompt Credit Agricole to downgrade NTES from an “outperform” to an “underperform.”

HP Inc (HPQ)

NTES wasn’t the only name to deliver a mixed message on Thursday. HPQ — the consumer-oriented half of the company formerly just known as Hewlett-Packard — also passed along a quarterly earnings result that was glass-half-full as well as glass-half-empty.

In the previous quarter, HP earned the expected 36 cents per share on sales of $12.25 billion. The top line topped expectations of $12.17 billion. Revenue was still down more than 11% last quarter, though, and income per share of HPQ still fell short of the 41 cents per share earned in the comparable quarter from a year earlier.

The real driver of today’s 4.4% pullback from HPQ shares, however, was mostly a less-than-impressive outlook for PC sales. The best HPQ CEO Dion Weisler could muster after the conference call:

“I think you have to be pragmatic. You have to continue to raise the bar on making sure you’re in absolute cost position. Never stop looking at every screw, every piece of glue, every component you put into a product…But you can’t cut your way to glory. You have to innovate your way to success.”

While Weisler may not plan on cutting his way to glory, he is cutting 3,000 jobs before the end of the year, fanning the bearish flames.

Vale SA (ADR) (VALE)

Last but certainly not least (and for the third time in just a little over a week), Vale has earned a spot on the daily “worst three” list. This time though, there’s a company-results-specific reason rather than a philosophical or presumptuous reason. That reason is, Vale reported miserable fourth-quarter numbers.

Last quarter, Vale SA lost a whopping $8.57 billion thanks to a combination of weak commodity prices and the collapse of two dams at a mine in Brazil which is jointly owned with peer and rival BHP Billiton Limited (ADR) (NYSE:BHP). The work stoppage and associated cleanup expenses have proven to be a much bigger burden than initially assumed.

VALE ended the day down more than 4%.

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/2016/02/why-vale-sa-vale-netease-inc-ntes-and-hp-inc-hpq-are-3-of-todays-worst-stocks/.

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