Why Zoe's Kitchen, Tuniu, and Tesaro Slumped Today

By Markets Fool.com


Image source: Zoe's Kitchen.

Continue Reading Below

Tuesday continued the stock market's recent trend of relatively volatility-free trading, with today's bias being slightly to the upside. Major market benchmarks rose by small fractions of a percentage point, although the Nasdaq Composite hit a new intraday record high before falling back slightly. Positive readings from the housing market helped restore confidence in the state of the U.S. economy, and investors are looking forward to comments from central bankers at their meeting in Jackson Hole, Wyoming, to try to determine the future direction of monetary policy both domestically and across the globe. Even though the general mood on Wall Street was guardedly upbeat, some stocks nevertheless gave up ground. Among the poorest performers on the day were Zoe's Kitchen (NYSE: ZOES), Tuniu (NASDAQ: TOUR), and Tesaro (NASDAQ: TSRO).

Zoe's gets burned

Zoe's Kitchen plunged 17% after the Mediterranean restaurant chain reported disappointing second-quarter financial results. Zoe's reported net income gains of more than a quarter on sales growth of 22%, but comparable-restaurant sales gains of just 4% were somewhat below the company's guidance for the full year. Of more concern was the fact that Zoe's downgraded its guidance for the remainder of the year, cutting between one-half and one percentage point from its estimate for comps, and guiding sales and margin figures toward the lower parts of the company's previous ranges. Even though CEO Kevin Miles pointed to continuing expansion plans for the restaurant chain, investors appear increasingly nervous that the highest-growth phase of Zoe's Kitchen's corporate history might be coming to an end.

Tuniu takes a hit

Tuniu dropped 11% following its second-quarter financial report. The Chinese online leisure travel company reported a near-doubling of gross merchandise value of tour bookings and travel-related products, sending net revenue upward by more than half. Yet operating expenses climbed by nearly 150%, causing Tuniu's net loss to more than triple rom year-ago levels. The travel company expects further revenue growth of 30% to 35% during the third quarter, but given the amount of competition in the travel space, many believe that Tuniu needs to move faster if it wants to have a chance to fend off its rivals in the fast-growing industry.

Continue Reading Below

Tesaro doesn't see follow-through

Finally, Tesaro fell 6%, giving up all of its gains from Monday's session. Investors had initially bid up Tesaro shares in sympathy with those of Medivation, which received a takeover offer from Pfizer on Monday. However, on further reflection, investors seemed to conclude today that an immediate buyout bid wasn't likely, and the ensuing sell-off send the shares substantially below where they closed last week before the Medivation announcement. Tesaro's promising phase 3 data in its trial of ovarian cancer treatment niraparib could be a positive catalyst in the future, but for now, the cancer-focused biopharmaceutical company will have to wait and let fundamental business success carry its share price higher.

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Zoe's Kitchen. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.