For the most part market participants behave badly sending stocks higher or lower not for reasons of value, but for reasons of emotion.
On June 28 shares of Research in Motion (NASDAQ: BBRY), the maker of the Blackberry mobile device plunged after a very disappointing earnings report. Finally a reaction that makes sense.
The company once left for dead had enjoyed a renaissance of sorts thanks to the launch of the Blackberry 10. With much hoopla and not much else the stock had nearly tripled in value in less than a year’s time.
It was a mirage and anyone buying that mirage should have known better.
Blackberry having fallen so far behind the competition had really no chance. Before the recent earnings report optimistic analysts were projecting a small profit for the company in its current fiscal year ending February 28, 2014.
Shares traded for something like 60 times those expected earnings – earnings mind you that were anticipated to become losses in the following fiscal year.
There was nothing about the company that was deserving of such a rich premium.
Sure enough the bottom fell out of the house of cards when earnings were released. Now the expectation on Wall Street is for the company to lose 55 cents per share in the current fiscal year. No wonder the stock fell and fell hard.
It makes one wonder where we can find the next monster earnings disaster like this one. When paired up with irrational exuberance the money making possibilities are huge.
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On the following pages I’ve got my eye on 3 stocks that could be the next 3 Blackberry like disasters.