Why Viacom, DaVita, and K2M Group Holdings Slumped Today

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Monday was a down day on Wall Street, with the Dow, S&P 500, and Nasdaq Composite all giving up between 0.1% and 0.2%. The trading session was relatively quiet on the Columbus Day holiday, with bond markets closed but the stock market open for normal trading hours. Most of those following the financial markets looked forward to the beginning of earnings season, hoping that the U.S. economy will be able to keep up positive momentum for the rest of 2017 and beyond. Still, some stocks suffered outsize losses. Viacom (NASDAQ: VIAB), DaVita (NYSE: DVA), and K2M Group Holdings (NASDAQ: KTWO) 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.

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Viacom deals with a downgrade

Shares of Viacom fell more than 6% after the media company got downgraded by Wall Street analysts. Professionals at Citi lowered their rating on Viacom from neutral to sell, cutting the price target on the stock by $9 to $24 per share. The analyst believes that competition in the cable television industry will force cable distributors to look to cut costs, and that could lead major cable distributors either to demand better terms from Viacom to distribute its content or to break ties with the media company entirely. Investors have already been worried about Viacom, and today's move sends the stock to levels not seen since 2009.

DaVita looks a little less healthy

DaVita stock dropped 10% in the wake of the company getting an analyst downgrade. The provider of dialysis services through its clinic locations got downgraded by JPMorgan, taking its rating on the stock from neutral to underweight and slashing its price target on the stock by $15 to $51 per share. A controversy concerning an organization called the American Kidney Fund and its financing of dialysis treatments has snared DaVita, and analysts are nervous that DaVita won't disclose information about how many of its patients have received funding from the entity. Even though the company has gotten good exposure from being a Warren Buffett holding, DaVita needs to address this controversy head-on and prove its fundamental business can recover fully.

K2M warns about tough times

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Finally, shares of K2M Group Holdings finished down over 18%. The provider of complex spine and minimally invasive healthcare solutions reported preliminary sales results for the third quarter and updated its outlook for the full 2017 year, warning that sales growth for the quarter is likely to come in up just 6% from last year's third quarter. Some of the shortfall came from procedures delayed by hurricanes in Texas, Florida, and Puerto Rico, and so investors can be optimistic that the company might recover that revenue in the current quarter. Yet a 3% to 5% reduction in revenue estimates for the full year goes beyond that short-term impact, suggesting true problems with K2M's distribution methods. The company will have to find better solutions in order to gain back lost ground.

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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of DaVita. The Motley Fool has a disclosure policy.