Earnings season for this year’s second quarter rolls on. And while the results have been largely better than expected, some prints have been real doozies. Certain companies have seen their share price fall by 15% or more in a single day after they delivered financial results and guidance than fell short of Wall Street expectations.
According to data from FactSet, a little more than 4o% of companies in the benchmark S&P 500 have reported Q2 results. Of those, 78% have beaten their profit targets and 60% have topped consensus revenue forecasts. FactSet says that we’re currently tracking for earnings growth of nearly 10%. If that proves accurate, it would be the best quarter for earnings growth since the fourth and final quarter of 2021.
Again, while the Q2 financial results have been very good overall, not every company has hit a home run. Many have struck out badly, and their shareholders are paying the price. Let’s examine three stocks to dump after disastrous Q2 earnings results.
Wayfair (W)
Shares of Wayfair (NYSE:W) fell more than 10% after the home-furnishings company reported Q2 financial results that missed Wall Street targets. The company that focuses on online sales of furniture reported EPS of 47 cents. That fell short of forecasts that called for 48 cents. Revenue totaled $3.12 billion, which was short of the $3.18 billion expected among analysts.
The disappointing results were blamed on a pullback in consumer spending. This was particularly on big ticket items such as furniture, as the American economy shows signs of slowing. However, in a dramatic move, management at Wayfair likened the current pullback to the experience in the 2008-09 financial crisis. Those comments didn’t help the stock any.
W stock has declined 33% in the last 12 months.
Arm Holdings (ARM)
Shares of Arm Holdings (NASDAQ:ARM) plunged 15% after the British chipmaker issued forward guidance that disappointed investors. The weak guidance overwhelmed an otherwise strong Q2 print from the company. Arm Holdings reported EPS of 40 cents versus 34 cents that had been forecast on Wall Street. Revenue totaled $939 million, which beat consensus estimates of $902.7 million. ARM’s revenue was up 39% from a year earlier. The company continues to benefit from strong demand for its microchips.
Unfortunately, Arm Holdings maintained its full-year guidance that calls for $1.45 to $1.65 in earnings and $3.80 billion to $4.10 billion in revenue. Analysts had $1.58 in earnings and sales of $4.02 billion penciled in for the company. Worse, ARM also said that it is no longer going to report the number of microchips that it ships globally. In this year’s Q2, it shipped seven billion microchips, which can be found in nearly every smartphone. The number of chips shipped in Q2 was down 10% from a year ago.
Going forward, Arm Holdings said it plans to focus more on the royalty revenue it generates from its microchips and processors. Currently, the company has 33 microchip and semiconductor licenses from which it earns regular royalty fees. Despite the post-earnings plunge, ARM stock is up 100% since its initial public offering (IPO) last September.
Riot Platforms (RIOT)
Bitcoin (BTC-USD) mining firm Riot Platforms (NASDAQ:RIOT) reported a Q2 loss of $84.4 million, which it blamed on costs that rose 48% from a year earlier. The company’s Q2 loss translated to a net loss of 32 cents per share. Riot Platforms said the loss was due to a sharp rise in its administrative expenses, which totaled $61.2 million. The company also had to pay $32.1 million in employee stock compensation during Q2, which is tied to a long-term incentive program.
In its earnings statement, Riot Platforms said that the Bitcoin halving event that took place this April lowered the amount of Bitcoin it could mine during Q2. The halving event reduced the available supply of Bitcoin, and the rewards miners receive for it, by 50%. RIOT said that it mined 844 Bitcoin during Q2, 52% less than a year earlier. The cost to mine Bitcoin rose 342% to $25,327 from $5,734 a year ago due to a dramatic increase in the power costs the company pays to mine BTC on banks of computers.
RIOT stock is down 35% on the year.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
