Even with a late rebound effort, stocks still closed deep in the red on Tuesday, with crude oil falling another 3.5% to a close near $48 per barrel. All told, the market lost about 0.9% today. The avalanche may have been spurred by a concerning outlook from Janus fund manager and market guru Bill Gross, though the bears were more than ready to sustain a selling effort that actually started a week ago.
Leading the bearish charge were Integrated Device Technology Inc (IDTI), Herbalife Ltd. (HLF) and Michael Kors Holdings Ltd (KORS). Here’s why.
Michael Kors Holdings Ltd (KORS)
Michael Kors Holdings was downgraded by Credit Suisse on Tuesday, sending KORS stock down more than 8%.
The specifics: KORS stock was downgraded from “outperform” to “neutral” by Credit Suisse analysts, primarily because of the heavy discounting Michael Kors has needed to do lately to remain competitive with rival merchandise also being sold in higher-end department stores. The handbag and accessory maker discounted its goods more than any other comparable name in the busy holiday shopping period of 2014, suggesting margins will narrow when quarterly results are announced in early February.
Credit Suisse also lowered its price target on KORS stock, from $103 to $79.
Herbalife Ltd. (HLF)
While there’s no specific news from or about Herbalife that prompted today’s near-8% plunge from HLF stock, it’s not tough to figure out the root cause for the renewed weakness.
After falling more than 50% in 2014 as the company ran into publicity and regulatory roadblocks, the sellers hit the ground running again when normal trading resumed Monday. The stock is largely falling now because it’s got so much bearish momentum.
Of course, it’s not like protagonist pessimist Bill Ackman hasn’t started to stir the pot again. The highly vocalized short-seller of HLF stock added a whole new layer of pyramid scheme “evidence” in late December, and that grand-standing has gotten plenty of mileage in the meantime… including today.
Integrated Device Technology Inc (IDTI)
Integrated Device Technology shares plunged nearly 9% on Tuesday, when two of its competitors decided to join forces, posing a potent threat to the wireless power transmitter manufacturer. Simultaneously, pressure may have been put on the stock stemming from the decision by Qualcomm, Inc. (QCOM) to utilize another company’s charging technology.
The former wasn’t news that was circulated by the media. Rather, fans and followers of IDTI stock put two and two together after The Alliance for Wireless Power and Power Matters Alliance announced at this year’s Consumer Electronics Show (going on right now) they’d be merging into one organization.
It’s a significant and troubling developing for Integrated Device Technology, in that the standards and intercompatibility of wireless charging devices still are not set in stone. With such an alliance being formed, odds are good that The Alliance for Wireless Power and Power Matters Alliance will be able to establish the de facto standards, and possibly leave Integrated Device Technology out of the proverbial loop.
As for the QCOM letdown, the cellphone chipmaker and cellphone manufacturer opted to use a wireless charging technology developed by On Semiconductor rather one developed by Integrated Device Technology.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
