The initial reaction to new revelations from Washington D.C. (Donald Trump Jr. acknowledged he met with a Russian attorney who said she had dirt on Hillary Clinton) was bearish. But, with investors largely becoming numb to political drama and allegations that go nowhere, stocks managed to recover — more or less — by mid-day. By the time the closing bell rang, the S&P 500 was at 2,425.53, down a mere 0.08% for the session. That’s still below a key line in the sand, though not alarmingly so.
However, Michael Kors Holdings Ltd (NYSE:KORS), Ulta Beauty Inc (NASDAQ:ULTA) and Snap Inc (NYSE:SNAP) shareholders didn’t catch that same break. Rather, these three names dished out an inordinate amount of pain to their investors, albeit for understandable reasons.
Here’s the deal.
Snap Inc (SNAP)
Snapchat parent company Snap is certainly no stranger to the daily worst-three list. But, today’s dubious distinction is unique in its prod. It was downgraded by Morgan Stanley, which was the recent IPO’s lead underwriter.
The downgrade itself wasn’t terribly dramatic. Morgan Stanley lowered its rating from “Outperform” to a still-palatable “Equal weight.” But, the investment bank also cut its price target on SNAP shares from $28 to $16. Analyst Brian Nowak explained:
“We have been wrong about Snap’s ability to innovate and improve its ad product this year and user monetization as it works to move beyond ‘experimental’ ad budgets into larger branded and direct response ad allocations.”
Today’s 9% plunge not only drug the stock below Morgan Stanley’s target, but also pulled Snap shares to a record low.
Ulta Beauty Inc (ULTA)
Shares of cosmetics company Ulta Beauty slid 4.8% on Tuesday, but not because of anything the company did. Blame department store chain Macy’s Inc (NYSE:M), which is reportedly slashing prices on high-end beauty products.
It was once a category thought to be bulletproof. But, with Macy’s being the second retailer to use pricing as a means of keeping its cosmetics and personal care customers coming back, Ulta Beauty investors are starting to second guess their assumptions about how secure its future really is.
Michael Kors Holdings Ltd (KORS)
Last but not least, Ulta Beauty wasn’t the only premium-oriented consumer brand to get hit hard today. High-end handbag name Michael Kors Holdings also found itself on the wrong side of the market’s table thanks to newly initiated coverage by MKM. In short, the research outfit views KORS as a “Sell.” Analyst Roxanne Meyer noted:
“Our below Street estimates reflect downside to comps and margins, in light of a slow infusion of innovation, changes to the merchandising and promotional strategy, over-exposure to wholesale, as well as our view that the operating margin is structurally headed lower from the shift to retail, investments in omni-channel, and product mix shift to lower margin categories.”
It wasn’t a blow KORS shares had room to suffer. Already down 16% year-to-date and off more than 60% from their 2014 high, today’s 7.4% setback puts the stock back within easy reach of a new multi-year low.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.