If you want to invest in the stock market, you’re going to experience some ups and downs, especially lately. The CBOE Volatility Index (VOLATILITYINDICES: ^VIX) has risen over the past month, suggesting that investors are feeling antsy as we get deeper into earnings season.
Long-term investors shouldn’t let short-term volatility influence their allocation decisions too much. Still, it’s important to monitor and absorb new information as it comes out — especially if a company’s long-term operations might be affected.
These four stocks were some of the big names moving the market last week.
1. Snap Inc.
The stock price for social media powerhouse Snap (NASDAQ: SNAP) fell 27% last week after a disappointing quarterly earnings report. During the company’s conference call, CEO Evan Spiegel indicated that Apple‘s (NASDAQ: AAPL) enhanced privacy setting in the latest iOS adversely affected Snap’s advertising business more than anticipated. Advertisers are no longer able to target ads directly to as many users, which ultimately reduces the number of marketing dollars that can flow to social media platforms like Snapchat.
Apple’s new setting could represent a real challenge to Snap meeting its lofty medium-term growth expectations. If optimism drives a stock’s valuation high, then any fear of stunted growth can send shares tumbling sharply. That’s exactly what happened here.
Even in the midst of all this negativity, Snap’s revenue still grew more than 50% year over year in the quarter, bringing the year-to-date growth rate to 77%. The company is also free-cash-flow positive, so it’s not bleeding cash even if it’s not reporting an accounting profit.
Snap is a high-growth company that operates close to breakeven, and its stock predictably trades at an aggressive price-to-sales ratio of 30. This was always going to be a volatile asset. From an investment standpoint, it’s most appropriate for investors who wanted to take a long-term buy-and-hold flier based on Snap’s market opportunity. This development might force investors to reconsider the stock’s prospects, but it’s hard to argue that the company should lose nearly one-third of its value in a week based on the news. Snap stock is still not “cheap” by any metric, so don’t be shocked by more volatility if you take the opportunity to buy on the dip.
Share prices of IBM (NYSE: IBM) dropped …….