Snap Inc., Macy’s, Trump-Comey fallout trash stocks Thursday
WASHINGTON, May 11, 2017 – While crude oil continued its climb back up toward the $50 handle in Thursday trading action, the rest of the market seemed largely stuck in the doldrums.
Financials and financial-related stocks (REITs, MLPs, utilities and the like), recent market darlings, seem headed back to the doghouse again, as the next Fed on-again, off-again interest hike looks like it might be on again for June, with today’s surprise drop in U.S. jobless claims adding more evidence to that conclusion.
Retail stocks seem to have hit another reef, with Macy’s (symbol: M) reporting lousy earnings, savaging its shares, which lost a whopping 15.65 percent as of 2 p.m. ET, down $4.58 a share. Tech stocks can’t make up their collective mind either, as Snapchat parent Snap, Inc. (SNAP) reported rotten earnings rivaling Macy’s. That stock was down $4.92 per share, a one-day loss of 21.4 percent as we write this, dropping it well below its IPO price.
With regard to SNAP, Matt Drudge’s current shock headline sums up the feeling among at least a few of the company’s naively enthusiastic Millennial investors:
Drudge’s headline links to a Wall Street Journal piece that elaborates on this not-so-Snappy subject:
“Snap shares may be losing a bit of cache among young investors.
“The under-30 crowd, the biggest users of the company’s disappearing photo app, were initially hot on the stock when it debuted on the public markets in early March. But, judging by brokerage data and social media platforms, that enthusiasm appears to have cooled a bit going into an earnings report Wednesday in which the company showed that is was struggling to maintain strong user growth as it competes with larger rivals like Facebook.
“The stock was down as much as 23% in the first minutes of trading Thursday, falling to an all-time low of $17.59. Snap began its life as a public company at $24 per share and jumped as high as $29.44 in the early days of trading. But it has since retreated, and hasn’t closed above $24 since early March.”
As you may recall if you’ve been reading our other column, we managed to land some shares in the SNAP IPO just for the heck of it. Given our internal brokerage IPO trading rules, we got out of the stock just a month or so later with a modest profit, figuring something like this would eventually happen, leaving all those idealistic investors holding the bag.
Who knows what the future will hold for SNAP shares? But given the haughty attitude of the company’s secretive founder – who, among other irritants, peddled these IPO shares without allowing voting privileges to its new shareholders – we’re not surprised at the stock’s current performance. The competitive monster known as Facebook (FB) has been attacking SNAP’s business model with similar features being offered to its massively larger subscriber base.
But actually somewhat worse, there’s little support for SNAP shares in the professional investing community, given shareholders’ inability to vote their shares. Hence, today’s market punishment, which is, effectively, a vote of no-confidence in the company’s know-it-all leadership.
Things can change, of course. But, as the travails of Twitter’s shares (TWTR) have demonstrated, tech is a cruel world. Once the novelty of your hot new product has worn off and slowed subscriber growth, if you don’t have growing ad sales to beef up that bottom line, the likes of Alphabet/Google (GOOGL) and Facebook will hose your shares at every opportunity.
Finally, although we are still discounting this story with regard to stock and bond trading, the phony alternative universe flap surrounding President Trump’s long-overdue sacking of former FBI Director James Comey is causing heartburn for at least some traders.
The left-wing media, Congressional Democrats, the bitter dead-ender otherwise known as Hillary Clinton and the Soros-funded resistance will try to keep this story alive, claiming it’s somehow worse than Watergate.
But while they’ll all likely fail once again in the end, this kind of political garbage distracts from the serious political promise of the current administration, and tends to make investors nervous, particularly during this annual “Sell in May” time of year.
It’s best to place your bets very carefully in a treacherous market like this one, particularly when this kind of political nonsense persists.