It’s bad enough when you own a stock that absolutely flops and gets killed after missing an earnings number, giving poor forward guidance or, even worse, both. What really adds insult to injury is when Wall Street analysts, many of whom were cheerleaders and pounded the table on the stock, suddenly reverse course and cut the stock to a hold or even a sell.
Last week was a very tough week for some very high-profile stocks, and many analysts on Wall Street did just what was described above. Analysts at one firm we cover here at 24/7 Wall Street, Stifel, held their ground on some companies that were murdered, and while lowering their price targets, they stay with their rating of Buy.
This high-profile tech stock was absolutely taken apart on Friday, after being a momentum trader’s dream for a few years. LinkedIn Corp. (NASDAQ: LNKD) operates an online professional network worldwide. The company, through its proprietary platform, allows members to create, manage and share their professional identity online; build and engage with their professional networks; access shared knowledge and insights; and find business opportunities.
The company also offers LinkedIn mobile applications across a range of platforms and languages, including iOS for iPhone and iPad, Android, BlackBerry, Nokia Asha and Windows Mobile, as well as a public website that allows developers to integrate its content and services into their applications.
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While the company posted adequate fourth-quarter results, but the guidance they offered was far below Wall Street estimates and the stock was crushed on Friday — to the tune of almost 44%. The Stifel analysts hold their ground, and while acknowledging that the sell-off is painful, they remind investors that the company is notorious for giving very conservative guidance. They feel that the wash-out in the shares does give investors a solid opportunity for the balance of 2016 and that LinkedIn is narrowing its focus on high-value, high-impact initiatives and jettisoning other investments that do not provide acceptable returns.
The Stifel price target for stock falls to $220 from $270, and the current Thomson/First Call consensus estimate is $196.48. Shares closed battered and bruised on Friday at $108.38.
Tableau Software
This is another red-hot stock that took a huge hit last week and is offering aggressive accounts a great entry point. Tableau Software Inc. (NASDAQ: DATA) provides business analytics software products in the United States, Canada and internationally. Its Tableau Desktop is a self-service analytics environment that empowers people to access and analyze data independently. Tableau Server and Tableau Public are a free cloud-based platform for analyzing and sharing public data. The company’s business intelligence platform with data management and scalability has the security to foster the sharing of data.
The company announced last year the launch of its Shanghai operations —Tableau (China) — as the company expands in China to better serve customers and partners locally. With 1.3 billion people, a quickly expanding urban economy and exponential rates of Internet and smartphone penetration, China generates an immense amount of data annually. Tableau can help bring that data to life for corporations seeking to assimilate the huge data input.
Like LinkedIn, the company reported inline fourth-quarter results, but it offered up fiscal year 2016 guidance that was way below what Wall Street expected and the stock was destroyed. It has given up almost all the gains since the company went public in 2013. To their credit, the Stifel analysts stand their ground on the stock and note that the poor guidance hardly changed the fact that the company’s competitive positioning remains very strong in its niche areas.
The Stifel price target dropped to $100 from $145, and the consensus target is $117.89. The shares closed Friday at $41.33, down a jaw-dropping 40%.
Lions Gate Entertainment
This is the third in the Stifel triumvirate of very good companies that posted some very bad numbers. Lions Gate Entertainment Corp. (NYSE: LGF) is a premier next generation global content leader with a strong and diversified presence in motion picture production and distribution, television programming and syndication, home entertainment, digital distribution, new channel platforms, video games and international distribution and sales.
The company has nearly 80 television shows on 40 different networks spanning its prime time production, distribution and syndication businesses. These include the critically acclaimed hit series “Orange Is the New Black,” the multiple Emmy Award-winning drama “Mad Men,” the hit broadcast network series “Nashville,” the syndication successes “The Wendy Williams Show” and “Celebrity Name Game” (with FremantleMedia), the breakout series “The Royals” and the Golden Globe-nominated dramedy “Casual.”
The company’s feature film business has been fueled by such successes as the blockbuster Hunger Games franchise, the first two installments of the Divergent franchise, “Sicario,” “The Age of Adaline,” CBS/Lionsgate’s “The Duff,” “John Wick,” “Now You See Me,” Roadside Attractions’ “Love & Mercy” and “Mr. Holmes,” Lionsgate/Codeblack Films’ “Addicted” and Pantelion Films’ “Instructions Not Included,” the highest-grossing Spanish-language film ever released in the United States.
The company posted weaker-than-expected earnings, and hopes for a merger with the Starz network seem to be up in the air for now. Stifel notes that the merger would be accretive and a positive, and feels that at current levels the valuation for the company remains compelling.
The price target is lowered from $42 to $35, while the consensus price objective is at $38.40. Shares closed the day on Friday at $18.53, down a massive 27%.
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There you have it, three good companies that were demolished last week. While the Stifel analysts holding their ground is commendable, it often takes fallen angels quite a while to regroup and come back. These are only suitable for very aggressive accounts as more selling in an already weak market could still come to pass.
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