5 Cult Stocks Getting Absolutely Destroyed After Earnings

November 3, 2016 by Jon C. Ogg

With stock market valuations so high and with the bull market approaching eight years old, many investors have been looking for new ideas for gains and income ahead. Looking outside of the norm can come with some serious risks, and there may be nothing riskier than cult stocks.

24/7 Wall St. identifies cult stocks often in the same light as “story stocks,” which would imply that the story is often larger than the reality or the current history of the company. As you will see, these cult stocks can fall from grace rather quickly — even if they haven’t been in the good grace of the trading gods for some time.

When investors see normal daily moves in the Dow Jones Industrial Average or in the S&P 500, they generally see a move of less than 1% up or down on any given day. A big news day might mean a move of 1% or 2%, but a 2% move on the Dow at this point is still more than 350 points in either direction.

Five of these cult stocks have put a serious sting on themselves and their shareholders either, in fresh trading Thursday or in recent days. The common denominator is that earnings season has been rather cruel to these companies, with drops of 20% to 40% on average.

Here are five cult stocks that have destroyed their shareholders so far during this earnings season.

Achillion Pharmaceuticals

Achillion Pharmaceuticals Inc. (NASDAQ: ACHN) may feel like the move is extreme, but its current $525 million market cap was valued at $835 million or so before the drop. Some investors may be disappointed on its drug development updates. Leerink has just warned about questions being raised by liver enzyme elevations in its ongoing MAD Study and being unable to get more information from the company. Things are substantially worse than in early 2015 when it was going to be a potential key biotech.

When Achillion reported its third-quarter financial results early Thursday, it posted a net loss of $0.15 per share with no revenues for the quarter. Consensus estimates from Thomson Reuters had called for a net loss of $0.16 per share with no revenue estimate. Last year, Achillion actually posted a profit during this quarter, $0.19 in earnings per share (EPS), and $33.82 million in revenue.

Achillion shares were last seen trading down 30.5% at $4.19 midday on Thursday. The stock even hit a new 52-week low of $3.78 (versus a 52-week high of $10.95). The 8 million shares traded by noon was also more than six times normal trading volume, and this already marked the most active trading day going back at least a year. Achillion has been public since late 2006, and it was a $15 stock in early 2007.

First Solar

It may feel like it is impossible for First Solar Inc. (NASDAQ: FSLR) to be a cult stock since it is the leader among U.S. solar outfits. Still, solar has fallen very much out of favor, and the fate of post-2016 subsidies remains in the air.

First Solar shares got demolished on Thursday after the company reported its third-quarter results. The company actually had a strong quarter on the bottom line, with $1.22 in EPS, versus the consensus estimate of $0.74. However, revenues failed to live up to expectations, coming in at $688 million, compared with the consensus estimate of $988 million.

Shares of First Solar were down 18.5% at $33.07 on Thursday, and the stock hit a 52-week low of $32.90 on the same day. Keep in mind that First Solar was down 1.1% at $40.58 ahead of earnings and down just 6.3% at $38.00 in Thursday morning’s premarket hours.

Fitbit

Fitbit Inc. (NYSE: FIT) is truly proving to be a one-hit wonder. It has great products and has a solid ecosystem being built, but the strategy for continued growth ahead feels more than just muted. It has seen many post-earnings analyst downgrades.

Fitbit saw its shares lose about a third of their value on Thursday after the company reported its third-quarter earnings after the close on Wednesday. Essentially, the company posted $0.19 in EPS and $503.8 million in revenue. However consensus estimates called for EPS of $0.17 and $506.9 million in revenue. Despite the earnings beat, investors are concerned that Fitbit might not be growing fast enough to compete with its larger wearables competitors like Apple or even Nike.

Fitbit’s stock price was down over 29% at $9.01 midday Thursday, and its new 52-week low is $8.93. Fitbit’s prior 52-week range was $11.65 to $38.15, and the old consensus price target was $20.88 before the slew of downgrades. What does 45 million shares (six times normal volume) traded by noon tell you?

Groupon

Though Groupon Inc. (NASDAQ: GRPN) is not a fresh earnings implosion this week, last week was more than brutal for the stock. The daily deals site making acquisitions is being deemed a waste of money by the company because the barriers to entry are next to zero.

Groupon released its most recent earnings report last week on Wednesday and consequently got slaughtered. The company posted a net loss of $0.01 per share and $720.5 million in revenue. The consensus estimates had called for a per-share net loss of $0.02 on revenue of $707.8 million. Global units sold declined 5% year over year to 49 million, primarily driven by country exits and restructuring efforts in international segments.

Groupon’s shares were last seen up 1.5% at $3.90 on Thursday, but this was a $5.26 stock ahead of earnings last week, and the drop to under $4 has now persisted for the fifth consecutive day. Investors were just starting to think this was getting better, as the 52-week range is $2.15 to $5.94. Even with the recovery from the post-earnings low, Groupon shares are still down over 25% from last week.

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YRC Worldwide

YRC Worldwide Inc. (NASDAQ: YRCW) is a far larger trucking outfit than its mere $279 million market cap would imply, based upon close to $5 billion in annual revenues. This is way down from years past, and analysts and many investors have thrown in the towel over the years.

The company reported its third-quarter earnings last week and investors were not happy, sending the shares lower by over 25% initially — and it got worse from there. The company had EPS of $0.42 and $1.22 billion in revenue. The consensus estimates were $0.53 per share and $1.23 billion, even if you understand that this has very thin analyst coverage.

Its shares were trading at $13.53 on October 27, and then they fell to $9.50 on well over the 3 million shares traded the following day. Now zoom forward and the stock was down to $8.02 by November 2. Shares were back up 4% more to $8.38 in midday Thursday trading, but this is still down a whopping 38%, even after the bounce. The 52-week range is $6.25 to $17.73, so it is down over 50% from its 52-week high.