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Not sweet music: Skullcandy plunges 20%

March 8, 2013: 12:44 PM ET
Investors can't cancel the Wall Street noise. Skullcandy's stock is getting crushed on a poor outlook.

Investors can't cancel the Wall Street noise. Skullcandy's stock is getting crushed on a poor outlook.

The skull and crossbones image is often used to warn people something is poisonous. It might be needed to warn investors to steer clear of Skullcandy (SKUL) stock.

Shares of the headphone maker plunged more than 20% Friday after warning that it would report a loss in the first quarter and big drop in sales. Several analysts slashed their ratings and price targets on the stock, which hit a record low of $5.27 on the news. To put that in perspective, the company went public in July 2011 at $20 and rose as high as $23.40 on its first day of trading.

Skullcandy's gruesome performance is in stark contrast to how two other companies from the IPO class of the summer of 2011 have fared lately. Online radio company Pandora (P) surged nearly 20% Friday after reporting better-than-expected sales. At just under $14, Pandora is still below its offering price of $16 ... but the stock is up 50% this year.

Then there's real estate listing site Zillow. Shares of Zillow (Z) are up nearly 80% this year and 150% from their offering price thanks to the continued housing recovery.

But sadly for Skullcandy investors, there weren't many optimists on StockTwits predicting sweet music for the company anytime soon.

$SKUL guidance was horrible. mgmt is jaded. IR disaster! They're TOAST!

$SKUL is a waste of space . its RIMM 6 months ago minus the potential turn around.

Ouch. So you're saying a name change wouldn't work like it did for BlackBerry (BBRY)? Skullcandy has a product called Smokin' Buds.  SMOK could be a fun (albeit prophetic ... especially if you follow it with mirrors) ticker.

$SKUL meaningless if they can't manage cash flow. Who needs a company that makes commodity products? Where's the moat? Margins?

This is a highly competitive market. On the low end, many people merely stick with the standard white headphones they get when they buy Apple (AAPL) products. Higher up, Sony (SNE) and Panasonic (PC) make quality noise cancelling headphones. But it looks the king of the industry right now (at least by my unscientific "survey" of what people are wearing on the F train every morning and evening) has to be Beats.

Others (including CNNMoney markets and investing editor Catherine Tymkiw) poked fun at analysts getting to the downgrade party late, rushing to cut their rating on the stock after it cratered.

Hipsters beware! $SKUL getting slammed after weak (understatement) sales outlook. At least 6 analysts downgraded the stock today.

$SKUL Ye Olde Pop and Drop Go Figure as All of the Smart Analysts out there come out with their "Downdgrades"! <Grins>

Still, there were a brave few who think the stock may be close to bottoming. Some mentioned the possibility of a takeover. And one trader even gave credit to management for not trying to pretend everything was okay.

$SKUL Too much honest in this world of deceive, but i trust a company who does not sugar coat things they need to expand & it cost money

A fair point. But just because you see the iceberg ahead of you and don't delude yourself into thinking it will melt, you still have to do something before you ram straight into it.

Speaking of sinking ships, it was a brutal week for J.C. Penney (JCP). Shares continued to plunge and now there are reports that Ron Johnson's job could be in jeopardy. My Reader Comment of the Week goes out to someone who had several inspired tweets on JCP ... and two in particular win my kudos for pop culture references.

That is awesome. I'm waiting for the inevitable Addams Family-Miami Vice mashup. Tubbs and Thing? It better have a Jan Hammer soundtrack. With licensed merchandise made by Martha Stewart (MSO) and available at JCP! And Macy's (M)? Oops. I'll let the judge sort that out.

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