Why Facebook, Aflac, and GameStop Slumped Today
The stock market continued its nearly straight-up streak of gains to begin 2018 on Friday, with major benchmarks climbing to a fresh set of records. Rises of between 0.5% and 1% were common among several popular indexes. Market participants reacted positively to earnings reports from major money center banks as a sign of what might be yet to come throughout the next month, when the bulk of large-cap companies will report their financial results for the past year and issue outlooks for 2018 and beyond. Yet despite the positive attitude on Wall Street, some stocks languished. Facebook (NASDAQ: FB), Aflac (NYSE: AFL), and GameStop (NYSE: GME) 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.
Facebook deals with fallout
Shares of Facebook declined 4.5% after the social media giant announced a strategic shift that some saw as potentially damaging to profits. Rather than emphasizing stories and other posts from publishers, advertisers, and other corporate interests, Facebook will return to its roots, re-emphasizing friends and family as an integral part of the social media experience. Investors fear that marketing clients will move away from the platform as a result, but those who like the stock would respond that initiatives like virtual reality are arguably far more important to Facebook's long-term success than incremental ad revenue on the company's namesake social media platform.
Aflac wrangles with reports
Aflac stock dropped 7% in the wake of reported allegations of insider trading, fraudulent sales, and financial manipulation. Aflac said that the claims made by what it called a small group of independent contractors were false, having done its own investigation of the claims and finding no merit to them. Yet the allegations paint a much different picture of the insurance giant, and despite the company's denials, the stock failed to recover much lost ground. With comparisons made to scandals at Wells Fargo, investors in Aflac are in no hurry to declare a premature end to the controversy.
GameStop plays a losing hand
Finally, shares of GameStop fell 11%. The video game retailer announced holiday sales results that showed solid increases, including same-store sales gains of nearly 12% from year-earlier figures. Hardware sales were particularly strong, but pre-owned sales suffered from greater interest in new titles. Yet the bad news for GameStop was that customers aren't upgrading mobile devices as quickly as anticipated, and that will force the company to take a $350 million to $400 million impairment charge in the holiday quarter. Concerns about GameStop's long-term viability linger, especially as video game companies move toward digital distribution business models that could cut out intermediary retailers entirely over time.
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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Facebook. The Motley Fool owns shares of GameStop and has the following options: short January 2018 $19 calls on GameStop. The Motley Fool recommends Aflac. The Motley Fool has a disclosure policy.