By Alex Eule | Thursday, February 22
Split decision. It was another volatile day on Wall Street, though the Dow Jones Industrial Average stayed in positive territory for the entire day. The Dow was up 350 points at noon, but investors pulled back from there. The index closed up 165 points, or 0.66%. There were no big headlines driving the market moves. Oil inventories fell, pushing the price of crude up 1.8% on the day. The 10-year Treasury yield fell a bit from yesterday's four-year high, to 2.92%.
The S&P 500 was up 2.6 points, or 0.1%, while the Nasdaq Composite fell 8.1 points, or 0.1%, its fourth-consecutive day of declines.
DJIA: +0.66% to 24,962.48
S&P 500: +0.10% to 2703.96
Nasdaq: -0.11% to 7210.09
The Hot Stock: Chesapeake Energy +21.7%
The Biggest Loser: Stericycle -19.1%
Best Sector: Energy +1.7%
Worst Sector: Financials -1.1%
Snap's Kardashian Problem
I didn't expect to be writing about the Kardashians in this newsletter, but the day has arrived. Shares of Snap fell 6.1% Thursday to $17.51 after Kylie Jenner tweeted that she no longer spends time on Snapchat. "sooo does anyone else not open Snapchat anymore? Or is it just me... ugh this is so sad."
Jenner has 24.5 million Twitter followers, making her Snapchat critique a material event for Snap investors. The day's selloff erased $1.38 billion from Snap's market value.
Jenner later tweeted "still love you tho snap ... my first love." First love doesn't mean much in the world of social networking. Many of us trace our social first to MySpace, and look how that worked out for the company.
One group that's probably feeling good about Jenner's comments are Snap short-sellers. S3 Partners, a financial analytics firm, estimates that Snap shorts made $163 million after the Jenner-inspired selloff. S3 notes that Snap has the largest short position within the application software sector, at $1.99 billion.
Jenner's tweets feed into this week's anti-Snap narrative. On Tuesday, Citi downgraded shares of Snap to Sell from Neutral and cut its price target on the stock to $14 from $18. Citi's downgrade was partially based on the negative user reviews about Snap's recent redesign.
But never mind Wall Street. If Snap wants to change the narrative, the PR team might want to reach out to Katy Perry or Justin Bieber and plead for a positive tweet. The singers each have a Twitter base that easily tops Jenner's, with 109 million and 105 million followers, respectively.
Hitting Pause on Roku
Shares of Roku, the popular streaming device company, had soared 265% since the company's initial public offering last September. So a hiccup was probably inevitable heading into the company's earnings report last night. But, based on the numbers, today's 18% selloff doesn't quite add up.
For the fourth quarter, the company reported $188 million in revenue, $6 million more than expected and it earned six cents a share against an expected loss of 10 cents. One issue: The company's revenue outlook for the current quarter didn't quite meet Wall Street's hopes.
"The nitpickers didn't like some of the numbers," Barron's Tiernan Ray told me today. That was enough to cause a tumble in the stock.
Last night, Tiernan interviewed Roku's CFO, who maintained a bullish tone about the business. Roku is still transitioning its business from a maker of streaming devices (like Apple TV and Amazon Fire TV) to a platform that hosts all sorts of streaming content. Tiernan noted last night that Roku's software now ships with one in five smart TVs in the U.S.
"This is a platform story,” Roku CFO Steve Louden said.
Investors have been thrilled by that idea, but today they found a fly in the ointment, based on commentary from Morgan Stanley analyst Benjamin Swinburne, who has an "Underweight" rating on Roku stock.
Roku users, once passionate buyers of the company's equipment, are increasingly accidental users -- buyers of a TV that happens to have Roku software inside. That could reduce engagement with the service. That worry had some investors pushing the sell button today.
What We're Reading
The Calendar
Investors might have overreacted to Roku's news, and they're having similar reactions to earnings news from HP and Hewlett Packard Enterprises -- just in the other direction. HP, the PC and printer maker, was up 7% after hours today, while Hewlett Packard Enterprise, the infrastructure/software side of the once joint business, jumped 12%.
Late Thursday, both companies reported quarterly results that beat expectations.
Thanks for reading and have a great night.
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