The Buzz

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Hated stocks finally get some hugs

August 3, 2012: 12:18 PM ET

It's been a good week for heavily shorted stocks reporting earnings. I wrote (and did a video) Thursday about how Green Mountain Coffee Roasters (GMCR) surged despite poor guidance.

First Solar (FSLR) was another company that popped on earnings news even though there are still many economic headwinds in the U.S. and Europe facing the maker of solar panels. That made it Thursday's Stupid Stock Move of the Day.

On Friday, it was OpenTable (OPEN) that, uh, turned the table on short sellers.

OpenTable's results topped forecasts, pushing shares of the online reservation company up nearly 20%. But many traders are still skeptical about the company's prospects. OpenTable, like Green Mountain and First Solar, may be experiencing a bigger leap than it should due to earnings.

That's because investors who shorted the company may merely be rushing to buy the stock en masse in order to avoid a big loss. That's known as a short squeeze. Remember that even though short sellers are bearish about individual stocks, they still have to buy the stock back eventually to cover their position.

There's nothing to prevent short sellers from going after OpenTable again. And based on some of the comments from traders on StockTwits, that might very well happen.

PAAResearch: 5% YOY growth in diners seated/restaurant at $OPEN spells MATURITY

herbgreenberg: "@ActAccordingly: All the signs of maturation are here, $OPEN has held back OPEX for as long as possible. Underlying metrics are weak"

TMTanalyst: $OPEN is ripping - guess people are still eating out (for now)

People may still be eating out. But the sluggish economy does appear to be taking its toll. And if lower-priced dining options like Starbucks (SBUX) and Chipotle (CMG) are starting to report slower growth in the U.S., that may be bad news for higher-end restaurants that use OpenTable's services. Plus, OpenTable didn't necessarily have a "good" quarter. It just beat forecasts. Sales were up. But profits were down. That's a bad equation.

Now to be fair, even a stock that's almost universally loathed by investors deserves to go up on good news. And OpenTable, Green Mountain and First Solar did show some encouraging signs to satisfy the bulls.

Shorts aren't always right. Another big squeeze occurred with online jewelry retailer Blue Nile (NILE). It surged 35%, prompting me (thanks to some trusty Twitter followers) to make that Friday's Stupid Stock Move of the Day!

But the shorts often are on the money. And the sad case of RadioShack (RSH) last week is a clear example of that. "The Shack" is one of the most heavily shorted stocks on Wall Street. And the electronic retailer's shares continued to plunge last week after woeful earnings. And at the end of the day, stocks that are shorted could be very volatile because investors aren't sure what the right price should really be as shorts and longs wage war.

@CreateCapital$OPEN is up 20% because nobody knows what its worth

Good point. But we do the stock is now valued at 25 times 2012 earnings forecasts. That's a lot lower than where it used to trade. But it may still be too much for a maturing business that may face increased competition from the likes of social reviews site Yelp (YELP) and Google (GOOG)-owned Zagat.

Reader Comment of the Week goes out to a college buddy of mine. I tweeted earlier this week about the upcoming IPO of Manchester United. My friend reminded me that the Man U owners also own a down on its luck football team in West Central Florida.

Too funny, Josh. And by the way, remind me to NOT take Josh Freeman and Mike Williams in our fantasy football draft this year!

  • Stupid Stock Move of the Day! Netflix up more than 10%?

    #StupidStock Move of the Day! Sorry. Don't get why 1B hours viewed is reason for $NFLX to pop 11%. Bogus justification for overvalued stock.

    — Paul R. La Monica (@LaMonicaBuzz) July 5, 2012

    Netflix (NFLX) investors were "jazzed" (oh how I miss Colin Barr) about the fact that CEO Reed Hastings gushed, on Facebook (FB) of all places, about how subscribers watched more than 1 billion hours of video in June.

    That post MORE

    - Jul 5, 2012 3:35 PM ET
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  • Stupid Stock Move of the Day! Chipotle down 6%?

    #StupidStock Move of the Day! Chipotle a huge fave of Mrs. Buzz & @CNNMoney video crew. But down 4.5% today on Q2 worries. An overreaction?

    — Paul R. La Monica (@LaMonicaBuzz) June 27, 2012

    My wife raves about Chipotle (CMG). I'm always seeing the 20-somethings in my office grabbing burrito bowls from there as well. I amazingly enough have never been to one despite loving Mexican food. But it seems like MORE

    - Jun 27, 2012 3:07 PM ET
    Posted in: ,
  • Stupid Stock Move of the Day! Walgreen down again?

    #StupidStock Move of the Day! $WAG down another 4%. Yes, Boots deal is pricey. But now below 10X '13 EPS estimates. Big discount to $CVS.

    — Paul R. La Monica (@LaMonicaBuzz) June 20, 2012

    Investors clearly do not like Walgreen's (WAG) big push into Europe. But is the Alliance Boots deal really so horrible that it justifies a nearly 10% drop in two days? Walgreen's fundamentals still look strong -- and that's MORE

    - Jun 20, 2012 3:09 PM ET
    Posted in: ,
  • Stupid Stock Move of the Day! Nvidia up 7%?

    #StupidStock Move of the day! $NVDA up 7% on $MSFT Surface tablet inclusion? Yes, it's good. But what if Surface is more Kin/Zune than Xbox?

    — Paul R. La Monica (@LaMonicaBuzz) June 19, 2012

    On the Surface, Microsoft's (MSFT) new tablet is a boon for graphics chipmaker Nvidia (NVDA). But I'm a little surprised the stock is up this much on the news. Considering that we don't yet know when the Surface MORE

    - Jun 19, 2012 3:03 PM ET
  • Stupid Stock Move of the Day: Groupon up?

    #StupidStock Move of the Day! $GRPN up 11% because $MS, one of its lead underwriters, upgraded it? Have people learned nothing? Come on man!

    — Paul R. La Monica (@LaMonicaBuzz) June 18, 2012

    A dot-com stock is surging after one of its underwriters upgraded it and people are wondering if the euro experiment will work. If I didn't know any better, I'd say it was 1999. Groupon (GRPN) surged more than 10% MORE

    - Jun 18, 2012 3:04 PM ET
    Posted in:
  • Stupid Stock Move of the Day! Microsoft up 2%?

    #StupidStock Move of the Day! $MSFT up 2% today? Isn't $NOK news bad? Isn't $1B a lot for Yammer? And will $MSFT tablet really hurt $AAPL?

    — Paul R. La Monica (@LaMonicaBuzz) June 15, 2012

    Microsoft (MSFT) is expected to unveil some tablet-related news at a big press conference Monday. This shouldn't come as a huge surprise. We all kind of expected that Mister Softee would go after Apple (AAPL) more directly MORE

    - Jun 15, 2012 3:08 PM ET
  • Stupid Stock Move of the Day! IGT up?

    #StupidStock Move of the day! Loose slots in Wall Street casino today. Gaming machine maker $IGT up 11% on buyback. Really? A bit much, no?

    — Paul R. La Monica (@LaMonicaBuzz) June 14, 2012

    Stock buybacks are nice. They are a sign of confidence and they can boost earnings per share by reducing count. But they don't really change the fundamentals of a company. And a buyback is merely a commitment to MORE

    - Jun 14, 2012 3:14 PM ET
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  • Stupid Stock Move of the Day! Dell up?

    @LaMonicaBuzz I nominate $DELL for stupid stock move of the day. After May earnings lost 11%, weak outlook, -50% 5yr rtrn - Div changes NADA

    — Jeff Reeves (@JeffReevesIP) June 13, 2012

    #StupidStock Move of the Day! @JeffReevesIP convinced me! $DELL up 4%? Dividend is nice. But earnings and sales growth would be much nicer.

    — Paul R. La Monica (@LaMonicaBuzz) June 13, 2012

    Dell (DELL) is finally parting with some of its cash MORE

    - Jun 13, 2012 2:47 PM ET
  • Spanish bank to lose unfortunate ticker symbol

    It's hard enough being a Spanish bank these days. The U.S.-listed shares of Banco Santander are down more than 20% this year amid concerns about the health of the Spanish financial system and Spain's (as well as Europe's) overall economy.

    But there's some good news for Santander. It is about to get a new ticker symbol on the NYSE that is less likely to be mocked. Santander wasn't doing itself any MORE

    - Jun 12, 2012 3:32 PM ET
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#StupidStock Move of the Day! $APT up 8%? Yes, there was a WSJ story on Ebola hazmat suit demand. And it did mention $LAKE. But not $APT.
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