Monday wasn't a very strong day for the stock market, as major market benchmarks dropped as much as half a percentage point from Friday's record levels. After such a strong performance over the past few weeks, it wasn't surprising to see a minor pullback, but some stocks got hit a lot harder than the overall market. In particular, J.C. Penney (NYSE: JCP), Trina Solar (NYSE: TSL), and H&R Block (NYSE: HRB) were among the worst performers in the market on Monday. Below, we'll look more closely at these stocks to tell you why they did so poorly.
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Image source: J.C. Penney.
Penney deals with a competitive Black Friday
J.C. Penney fell 5% after the most important shopping weekend of the year. Much of the attention in the retail world went to electronics-sellers, with televisions, gaming consoles, and mobile devices pulling in many of the most-watched deals over the weekend. Channel checks suggested that J.C. Penney dealt with a tough competitive environment by boosting its promotions from previous years' levels, and some investors were unquestionably nervous that the net impact of those promotions could be to depress profit margin levels and jeopardize its bottom line. Yet some noted that this was the first time that J.C. Penney reported sales in new areas like appliances, and it remains to be seen whether those new areas help or hurt the department store's overall sales and earnings for the holiday quarter.
Trina hits a shady patch
Trina Solar dropped 8% as investors became nervous about whether an expected leveraged buyout is likely to gain approval and go forward. The solar company expects to vote on an offer from Trina board chairman and founder Jifan Gao in mid-December, with shareholders slated to receive $11.60 per share in cash if the deal goes through. With the stock trading just over $9 per share, investors clearly have their doubts about whether a buyout will actually happen, and worries about the general future of the solar power industry have also weighed on Trina and its peers. Despite the risks involved, the potential profit if the buyout does go through is exceedingly high, offering an attractive opportunity for risk-tolerant investors.
H&R Block takes another hit
Finally, H&R Block declined 9%. Analysts at BTIG downgraded the stock from neutral to sell, dealing the tax-preparation specialist with the latest in a string of similar setbacks. Investors are greatly concerned that planned reforms under a Trump administration will dramatically decrease demand for its tax-prep services, which make up the core of its business. Moreover, the company could also have trouble making money with its financial products, especially given that regulation covering refund anticipation loans and similar offerings have made it somewhat more difficult to make offers to customers that will appeal to them. Overall, H&R Block needs to figure out how to diversify its business if it wants to survive what could be disastrous impacts from tax reform.
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