The latest all-time high wasn’t necessarily a happy development for every company, of course. Due to negative developments that were reported as the market was reaching its peak, a pair of familiar stocks were hit with investor sell-offs. Here’s a brief look as to why, and whether they are worthy of consideration now that they’re cheaper.

Nokia

Nokia (NYSE: NOK) is a poster child for a once high-flying tech stock grounded by unwise business decisions and determined competition. Since effectively ceding the smartphone space to the likes of Apple and others more than a decade ago, Nokia has struggled not only to succeed, but to stay relevant in a market that often shifts with blazing speed.

This was brought into stark focus late last week when the company made significant cuts in its guidance and suspended its dividend when unveiling its latest quarterly results.

Now, these worrying moves don’t necessarily mean its current business is hurting; both were made because Nokia is planning large-scale capital investments into promising areas for growth, specifically 5G networking.

In other words, Nokia is placing a big bet that it can become a player in 5G, and it’s not going to take the path of Mature Tech Stock Producing Net Profits and Pumping Out Dividends. But given the sell-offs in the stock over the past few days, of which Monday’s 5% drop was the latest, investors don’t believe Nokia can succeed with this approach.

They might have something there. Retrenching for an assault on 5G seems like a late-inning rally. The technology has been in development for quite some time, and some of the biggest and toughest competitors in tech have been gearing up for years to take advantage.

So while it’s sensible to go for this big prize, Nokia might not be a good vehicle for investors to buy into. Yes, the price fall in Nokia stock over the past few days might make it more attractive, but I’m not sure there’s much upside in store for this fallen angel.

Restaurant Brands International

Monday wasn’t a very tasty day for shareholders of restaurant chain operator Restaurant Brands International (NYSE: QSR). The stock slumped by nearly 4% on the day.

The clear reason why was quarterly earnings, which, although not bad, weren’t inspiring enough to pull the company ahead of its fast-casual segment competitors.

For RBI’s Q3 of fiscal 2019, the company booked $1.46 billion in net sales, which was 6% higher on a year-over-year basis and generally in line with analyst estimates. Meanwhile, non-GAAP (adjusted) net profit saw a more robust 13% rise to $337 million ($0.72 per share), yet like net sales, this essentially met analyst projections.

Of RBI’s three business units — Canadian coffee mecca Tim Hortons, classic fast-food joint Burger King, and the specialty Popeyes — only the former saw a drop in sales of restaurants that have been open for a year or more. This decline wasn’t major — it was 1.4% — while Burger King’s result was in the black at almost 5% and Popeyes approached 10%.

The problem is, Tim Hortons is far and away the most important of the three for RBI, responsible for around 60% of RBI’s revenue. So at least to some extent, as that unit goes, so goes investor sentiment in RBI.

Outside of McDonald’s, which has done a much better job than anyone had a right to expect in cutting costs and bringing traffic into its restaurants, traditional fast-food operators have struggled in recent years. Many fast-casual restaurants offer healthier food served just as quickly as their more traditional rivals, in environs that are often cozier.

I think RBI is pretty well managed, and has done a good job getting a bit ahead of food trends (witness the recent rollout of the alt-meat Impossible Burger in Burger King restaurants). Analysts are predicting better profitability, with an average estimate of 9% in per-share net profit growth from this fiscal year to the next.

But even with Monday’s decline priced in, RBI still trades at a forward one-year PEG ratio of over 2.5. This is high, especially considering that the company operates in a less-popular segment of the restaurant market, and its growth prospects aren’t particularly strong.

The post Why These 2 Top Stocks Got Pounded on Monday appeared first on The Motley Fool Canada.

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As ever, though, some top stocks bucked the overall trend with some nice price leaps, while others fell to earth. Since it’s always nice to begin the week on a note of optimism, here’s a look at two companies in the former camp.

Tesla

An up-and-down stock if ever there was one, Tesla (NASDAQ: TSLA) accelerated today to close nearly 4% higher.

There’s no clear, immediate reason for the stock to enjoy such a bump… but then again, reason doesn’t always apply to Tesla. Like Apple in certain ways, the company has a core of fans who love its business and aesthetics, and admire the — shall we say — frequently unorthodox approaches CEO Elon Musk employs to manage its operations.

These bulls aren’t entirely off base, looking at recent events. No, the company didn’t hit its ambition of delivering 100,000 cars in its Q3, and at a tally of just over 96,000, it fell short of analyst estimates, too (although it was a quarterly record for the company).

Nevertheless, 96,000-plus is an impressive number for a maverick niche manufacturer in a tough, capital-intensive industry that doesn’t come close to the scale of a General Motors or Ford. Those two giants, by the by, are still to some extent playing catch-up to Tesla in the electric vehicle (EV) space.

This summer Tesla also announced a modest price cut to its best-selling Model 3, in the hopes of juicing sales.

Investors who bid up Tesla today might also be counting on better-than-expected results when the company reports its official Q3 numbers next week. Analyst estimates are, unsurprisingly, all over the place — according to Yahoo! Finance they range from a solid per-share net profit of $0.34 to a red-soaked $3.52 loss.

Given the chronically high expenses and cash issues saddling the company, I’d bet on a shortfall, but this company always has the capacity to surprise us. That said, I’m still wary of Tesla, as I think it has many challenges it hasn’t fully proven it can surmount.

Shopify

A recent addition to the up-and-down stock club is software-as-a-service (SaaS) purveyor Shopify (NYSE: SHOP). Adding to recent gains following a dip, the company’s stock rose by almost 5% today.

Is this justified? I think so. Shopify is a facilitator of e-commerce services, so if, for example, I start a business called Eric’s Not Overly Tasty Lemonade, I can use the company’s digital tools to sell my semi-quality beverage online.

No one who has turned on a PC or mobile device in the past few years has to be told that the e-commerce space is growing exponentially. Shopify is also on the rise, with a nearly 50% year-over-year increase in revenue in its most recently reported quarter.

This is the kind of sector and company-specific growth investors look for, so it’s no wonder that Shopify is experiencing yet another spurt of popularity. Of course, there’s competition in the form of monoliths like Amazon.com, but Shopify seems to be doing a good job competing on quality and value.

The company will surely continue to ride the ever-cresting e-commerce wave. Meanwhile, Shopify’s $450 million deal last month to acquire robotic warehouse equipment specialist 6 River Systems indicates it’s got a sharp eye on future growth opportunities in complementary segments.

As is typical for a young(ish) tech company, Shopify is unprofitable. Yet those losses are not necessarily all that scary, and the company is in the right place at the right time with the right products. It feels very much like a buy to me, even with the latest share price rise.

The post The Stock Market Flopped on Monday, but These 2 Stocks Popped appeared first on The Motley Fool Canada.

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Several companies ignored that volatility, rising notably over the five days to take positions on the “top gainers” scorecard. Here’s a glance at two of these winners, both of which happen to be tech stocks.

Box bulls break out

Cloud storage specialist Box (NYSE: BOX) wrapped up a sweet 7%-plus gain over the course of the week.

There was little of note that happened to the company across the five-day stretch. Rather, I think the stock made a quick recovery after being slapped with a downgrade from JPMorgan Chase unit J.P. Morgan Securities the previous Friday.

The bank shifted its recommendation from “neutral” to “underweight” (i.e., “sell”), on concerns of client expense-cutting and the risk that customers will migrate to larger and more powerful rivals.

It seems that Box bulls pounced on the chance to pick up shares on the price weakness that resulted from this recommendation chop. Did they have good reason to do so?

The big buy-in from activist investor Starboard Value last month is a vote of confidence in the company. In contrast to its typical approach, Starboard has not been critical of management — indicating that, true to its name, the company invested because it sees value in Box, rather than an opportunity to benefit by being a disruptive shareholder.

Yet there are concerns about Box’s recent performance. Total revenue was up a healthy 16% in the company’s most recently reported quarter, but deferred revenue (up 10%) and billings (6%) didn’t keep pace. This performance portends a subsequent slowdown in the total revenue growth rate.

Also, while Box flipped to a net profit on a non-GAAP (adjusted) basis, said profit is rail-thin, and the company expects the same, at best, for the entirety of 2020. Box is not yet a proven profit-maker, and big competitors — Microsoft and Alphabet, as pointed out in J.P. Morgan’s note — are looming.

Box’s gain last week was one of the best in the IT sector. I wouldn’t necessarily count on a repeat in the coming weeks, though.

Palo Alto Networks: mission critical

Investors in top cybersecurity solutions provider Palo Alto Networks (NYSE: PANW) enjoyed a 4% lift in the company’s stock over the five-day stretch.

As with Box, there was little immediate news during the period that should have helped Palo Alto defy gravity — save, maybe, for two of its products that received a somewhat technical form of approval from the federal government, an important client.

Perhaps the ever-growing realization of just how mission-critical cybersecurity is in our increasingly digitized world is putting the juice in related stocks, a number of which also traded up during the week.

Palo Alto Networks feels like a good bet, because while its growth rates aren’t what they were in the past, they’re still robust — both revenue and billings popped 22% year over year in the latest reported quarter. The company remains a cash-generating machine, so it can buy growth with its frequent acquisitions of state-of-the-art security businesses.

Palo Alto Networks feels it can continue to improve billings at a minimum 20% clip over the next few years. The company is a relatively established and mature business, and it operates in a highly competitive and fast-moving field. That potential level of growth, then, is very encouraging. I think this stock is still worth considering.

The post 2 Stocks That Soared Last Week appeared first on The Motley Fool Canada.

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The former took a 21%-plus hit to its share price, while the latter closed down 4% on the day. Let’s take a look at what happened with the pair, and whether these price declines present buying opportunities.

Rite Aid: The dangers of an analyst downgrade

One of the biggest stock decliners was Rite Aid, the pharmacy chain operator. Investors scuttled away from the shares after influential Deutsche Bank initiated coverage on the stock.

It probably goes without saying that the investment bank wasn’t exactly bullish on the company’s prospects. Deutsche Bank’s analyst George Hill slapped a sell rating on the stock at a price target of $5.00 per share — well below its price at market close on Wednesday.

Hill cited a number of factors in his downbeat analysis, including what he considers to be a dubious reliance on regional health plans and pressure from reimbursements for drug prescriptions.

For several years now, the market as a whole has not been bullish on Rite Aid save for a few brief stretches of optimism. A failed merger between it and Walgreens Boots Alliance announced in 2015 devolved into a disappointing sell-off of over 1,900 Rite Aid stores to Walgreens. A subsequent planned acquisition by supermarket chain operator Albertsons also flopped.

So Rite Aid these days is smaller, and lacks the prominence and power of its larger peers. Although some of its operational and financial metrics have risen lately, the company is still struggling to lift its revenue and mop up pools of red ink on the bottom line.

That said, the American populace is getting older. This should have positive knock-on effects throughout the broad world of healthcare. Savvy operators in niches like the pharmacy segment can capitalize on the opportunity.

But as it looks now, Walgreens and other big pharma players in this game are better positioned than the weakened Rite Aid to do so. So perhaps Deutsche Bank’s harsh outlook on the stock isn’t fully justified, but it highlights numerous sensible concerns about the company. Rite Aid isn’t looking like an opportunistic buy even with the steep price fall.

Oracle results, CEO hiatus weigh on sentiment

The overwhelming reason for Oracle’s Thursday decline was quarterly results, mixed with some potentially worrying news from the C-suite.

Oracle’s Q1 revenue didn’t come in quite as high as the average analyst estimate ($9.22 billion was the result, versus the anticipated $9.29 million). The non-GAAP (adjusted) net profit was more or less in line with expectations, however, at $2.76 billion ($0.81 per share).

Perhaps more of a concern was the unexpected news that co-CEO Mark Hurd is temporarily withdrawing from the company because of what the company vaguely described as “health related reasons.” Investors tend to favor steadiness and consistency in the performance of their companies, particularly when they’ve been Big Cheeses in their industry for years. Such is the case with Oracle.

What also doesn’t help is Oracle’s reliance on big share buybacks, which to some feel like gimmicky and expensive ways to goose per-share earnings. In its Q1 release, the company said it has authorized another $15 billion for the purpose.

Still, the dip feels like an overreaction to these recent happenings. Oracle is still, in my opinion, doing well in its long transition to a provider of cloud-based services. It has made several clever acquisitions in potentially high-growth segments, and it has the capital, experience, and client base to exploit the presented opportunities. I would certainly consider buying Oracle on this slump.

The post These 2 Stocks Got Crushed by the Market Yesterday — Are They Now Buys? appeared first on The Motley Fool Canada.

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