Friday's Losers List - What To Do Now

Includes: FB, GDOT, SBUX
by: Markos Kaminis

Friday's leading losers list, in terms of price percentage decline, included several high profile names. If you are holding the shares of these firms, you need to know what to do next. I'll try to add some value in that regard.

Leading Losers List

Company & Ticker

Friday's % Decline

Green Dot Corp. (GDOT)


RadiSys (RSYS)


ATP Oil & Gas (ATPG)


iPath Short Extended Russell 10 (ROSA)


Horizon Pharma (HZNP)


iPath Short Extended S&P 500 (SFSA)


Coinstar (CSTR)


Dehaier Medical Systems (DHRM)


Socket Mobile (OTCQB:SCKT)


Direxion Daily BRIC Bear 3X (BRIS)


Sequenom (SQNM)


Endologix (ELGX)


Amarin (AMRN)


Porter Bancorp (PBIB)


Facebook (FB)


QLogic (QLGC)


Direxion Daily Russia (RUSS)


Carver Bancorp (CARV)


VirnetX Holding (VHC)


Whiting USA Trust (WHX)


Stratus Properties (STRS)


Advantest (ATE)


Starbucks (SBUX)


Facebook's decline made world news, so I doubt any readers here missed it. After suffering a 12% loss on top of an 8.5% decline the day before, FB investors just said goodbye to a lot of value. However, based on the movement of the shares through the day, the discount attracted some money into the name before the close. FB hit an intraday low of $22.28 Friday, but closed 6.4% higher from there.

Briefly on the EPS report, Facebook met the quarterly expectations of analysts, as it earned adjusted EPS of $0.12. Still, the consensus estimate had come down from $0.15 in the 30 days prior to the report, so the result was not enough to lift the stock. I think the company's management team is also mishandling Wall Street, playing the game the way they want to rather than the way the system is used to. Unfortunately, that has cost investors a good chunk of value, in my view.

But is the stock worth buying now? My answer to that is definitely yes. I think that over the near-term there'll be some uplifting analyst commentary and probably enthusing news from Facebook itself before the next EPS report. Still, the shares will have a ceiling until they produce a better earnings report, or offer some guidance for a good near-term growth outlook.

FB shares trade at 42X my EPS estimate of $0.57 for the next 12 months. That matches against analysts' 31% EPS growth forecast for 2013 and 28% growth outlook for the next five years. At the forecast pace of growth, the 12-month forward P/E on Facebook will be around 32X this time next year if it simply stays put at this valuation, in my estimation. So I don't see much more risk of capital loss from here that would not be recovered by the end of the year. That is a margin of safety, and by now we all should know what's possible for this stock. Therefore, I recommend buying Facebook shares here, as negative sentiment has been overdone in my view.

Starbucks was at the bottom of this list but that just means it was the best loser Friday. It fell 9.4% after disappointing investors with its earnings report, as it missed expectations for the first time in more than three years. Starbucks was two cents short of expectations, but also lowered its guidance. This time around, its boisterous CEO, Howard Schultz, listed every global economic issue that reaches the daily wire as a cause of its issues. You know, back in May, after it reported last quarter and its management team reassured it would overcome European softness, I penned, "Why I'm Not Buying Starbucks." I wrote, "So, while the company's P/E/G ratio does not seem out of kilter today, which is what I'm sure Jim Cramer and other enthusiasts of the stock and similar issues are looking at, should earnings expectations fall, the stock price would be left lofty without support beneath it." Well, that's exactly what happened.

Green Dot collapsed 61%, reminding investors of the importance of certainty and clarity to the market. The company missed EPS expectations and cut its earnings guidance significantly. Contributing to the steep decline was management's notation of the causes, which were downright troubling. Green Dot said it was rising competition in the prepaid card business, as it looks like some of its customers, potentially including Wal-Mart (WMT), might start selling competitors' offerings alongside its cards. In its press release, the company also mentioned, "…the impact of new internal risk policies and controls to improve the security and quality of our portfolio." If that's not ominous, I don't know what is. Without clarity and certainty, and with its market share and revenues threatened, I would stay away of the day's leading loser.

Disclosure: I am long FB.