Friday was a positive day for the stock market, as the major benchmarks built on gains achieved over the last several trading sessions. Investors seemed to shrug off news that job growth slowed in August, as employers added 156,000 jobs for the month, lower than the 180,000-190,000 expected by economists. The market was relatively quiet as negotiations continued regarding the North American Free Trade Agreement. Yet some companies faced their own specific obstacles, and Snap Inc. (NYSE:SNAP), Tech Data Corporation (NASDAQ:TECD), and Ambarella, Inc. (NASDAQ:AMBA) were among the worst performers on the day. Below, we’ll look more closely at these stocks to tell you why they did so poorly.
Snap can’t shake Facebook fears
Shares of Snap fell 1.7% following negative analyst comments that reignited concerns over increasing competition from Facebook, Inc. (NASDAQ:FB). The company behind the popular Snapchat app was the subject of a bearish take issued late Wednesday by Wedbush Securities analyst Michael Pachter. In a note to investors, Pachter pointed to Facebook’s capacity “to deploy significant development resources efficiently.” Facebook’s Instagram app has relentlessly copied its competitor’s most popular features, now offering Stories, live video, and disappearing messages, all of which originated on Snapchat. Snap investors have long been worried about the competitive threat and significant resources of the company’s larger rival.
Additionally, the analyst stated, “We believe that Facebook’s introduction of Instagram Stories is intended to insulate itself from losing users to Snapchat, and the rapid growth in the Instagram Stories user base reflects that this strategy is working.”
Tech Data’s earnings miss
Tech Data stock plummeted 20.7% after the company announced disappointing second-quarter results and guidance. The high-tech products distributor said it grew net sales to $8.88 billion, an increase of 40% over the year-ago quarter and ahead of analysts’ consensus estimate of $8.71 billion. Unfortunately, significant increases in operating expenses resulted in non-GAAP earnings per share of $1.74, missing expectations of $2.06 in per-share earnings. The company also provided earnings guidance for the current quarter sharply below analysts’ estimate.
Remarking on the results, chairman and CEO Robert Dutkowsky said, “Our fiscal 2018 first-half results clearly show the enhanced earnings and cash-generating power of the new Tech Data. In Q2, worldwide sales exceeded plan and our teams maintained disciplined cost controls; however, we did not deliver the earnings we expected in the quarter.”
Ambarella’s unimpressive guidance
Finally, shares of Ambarella crashed 22.4% in the wake of the company’s second-quarter financial report. The camera and video-chip specialist said that revenue increased to $71.6 million, up 10% from the year-ago quarter, while GAAP earnings per share fell 60% as the result of pressure on gross profit margins and increased research and development expenses. Both revenue and earnings exceeded analysts’ expectations.
CEO Fermi Wang seemed upbeat about the results, saying, “During the second quarter, we had solid growth from IP security, both from professional and home monitoring camera markets. We also continued to see growth in our OEM auto business, with strong design win activity and revenue from OEM auto video recorders.”
Lower earnings compared to the prior year and a lukewarm forecast appear to be the major catalysts for the stock’s sharp decline, and investors seemed to lose patience with Ambarella’s failure to turn revenue into profits.
Danny Vena owns shares of Facebook. The Motley Fool owns shares of and recommends Ambarella and Facebook. The Motley Fool has a disclosure policy.