With the outcome of this year’s Presidential election becoming increasingly unclear, concerned investors continued to exit the market. Today’s close of 2,088.69 for the S&P 500 was not only 0.44% less than Wednesday’s last trade, but marks the sixth-straight day the market has lost ground.
As bad as that was, the session was even more painful for owners of Fitbit Inc (NYSE:FIT), Gap Inc (NYSE:GPS) and Facebook Inc (NASDAQ:FB). All three companies waved alarming red flags.
Facebook Inc (FB)
Usually one of the market’s favorite names, social networking giant Facebook fell out of favor on Thursday following Wednesday’s release of its third-quarter numbers. The results were better than expected, but the future doesn’t look as bright as most FB investors were hoping it would be.
For the quarter that ended in September, Facebook earned $1.09 per share on revenue of $7.01 billion. The pros were only looking for sales of $6.92 billion, and earnings of 97 cents per share of FB.
The top line was up 56% on a year-over-year basis, while operating profits jumped 91%. The era of easy growth for Facebook may be coming to a close though. The company also cautioned that its growth pace would meaningfully cool now that its maximum ad capacity was being met.
FB shares ended the day down 5.6%.
Gap Inc (GPS)
Retailer Gap didn’t do anything wrong per se today to merit the 4.8% setback GPS suffered. But, when a company is struggling as much as Gap is, anything that can be viewed in a pessimistic light will be viewed in a pessimistic light.
The catalyst for the dip was a report that CFO Sabrina Simmons would be leaving the company at the end of the current fiscal year. No specific explanation was offered, and her exit appears to be amicable on both sides of the table. Mizuho analysts Betty Chen and Alex Pham suspect it could be a sign of trouble, however, commenting:
“We believe the departure of CFO Simmons leaves a large gap in the management bench as the company continues to struggle with reshaping the Gap and BR brands. As a key player in the company’s disciplined expense control and efficient capital structure who has protected the bottom line in a period of sales volatility, we question the timing of her departure and whether it dims EPS visibility in the future. While we believe estimates remain intact for 3Q and 2016 on Old Navy strength, we are wary of 2017 prospects.”
Fitbit Inc (FIT)
Finally, shares of wrist-worn fitness tracker company Fitbit were outright trashed on Thursday, closing 33.6% lower against a backdrop of assumptions that the organization simply is beyond salvaging.
There are two key reasons for the sharp selloff from FIT, though only one explicitly described by the financial media. The explicit one is the disappointing fourth-quarter outlook that was delivered along with third-quarter numbers. Fitbit foresees revenue of only $725 million to $750 million for the all-important holiday-shopping quarter currently underway. Analysts had been calling for a top line of $985.1 million.
The other, bigger reason FIT was hit so hard today was the subconscious realization that, while a novel and somewhat marketable idea, it was never the mass market device it was made out to be. As Jim Cramer put it, “I think everybody who wants a Fitbit has one.”
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
