What happened
Shares of Synchronoss Technologies (NASDAQ: SNCR), 2U (NASDAQ: TWOU), and Etsy (NASDAQ: ETSY) fell 10%, 9.4%, and 9.5%, respectively, on Friday despite a lack of company-specific news.
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Rather, with no new press releases, SEC filings, or negative developments that might otherwise cause such drops, these three stocks appear to be falling in tandem with the broader market’s decline.
So what
That’s not to say there weren’t factors that could have made these three companies more susceptible to the market’s downward momentum.
Synchronoss, for one, is still well off its 2018 highs, given an enormous drop in May, namely after the cloud-computing company was suspended from trading on the Nasdaq as an internal audit process caused long delays in filing its usual quarterly and annual reports. But Synchronoss had also rebounded more than 60% from its August lows as of yesterday’s close, driven by progress demonstrated within its financial results once its quarterly filings resumed. That rise has undoubtedly left some traders keen to take profits off the table.
Meanwhile, online education platform company 2U has shown a tendency to plunge even in the face of good news in recent months. Shares fell nearly 19% early last month in spite of its stellar third-quarter results: 2U’s quarterly revenue soared 52% year over year to $107 million, near the high end of its guidance, translating to a narrower-than-expected adjusted net loss of a penny per share. 2U management even followed by narrowing its full-year 2018 guidance to the high end of its previous targets, offering a 2019 outlook that was in line with Wall Street’s own estimates, and teasing it’s on track to reach $1 billion in annual revenue (from $411.5 million expected in 2018) in a little over three years.
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So what gives? For one, as of early September, 2U stock had climbed 50% year to date in 2018. That also meant the stock had skyrocketed more than 500% a little more than four years after its early 2014 initial public offering. Then again, maybe the market was less than impressed with 2U’s growth targets given its meteoric rise. But I maintain 2U’s long-term upside potential is still hard to beat.
Finally, Etsy’s pullback is a little easier to explain. Shares have still more than doubled so far in 2018 even after today’s decline, including a 27% pop in the month of November on the heels of Etsy’s exceptional third-quarter results. Its revenue last quarter jumped more than 41%, aided by a higher pricing structure put into place earlier this year. Its earnings of roughly $20 million, or $0.15 per share, also more than doubled Wall Street’s models.
Alas, when the broader markets pull back hard as we saw this week, high-flying names like Etsy tend to get hit even harder.
Now what
In the end, I’ll reiterate that investors should try not to lose any sleep over no-news drops like these. Instead, strive to focus on the fundamental stories of the businesses underlying the stocks that you own. In the case of Synchronoss Technologies, 2U, and Etsy, I’ll venture to say those stories are still firmly intact.
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Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends 2U and Etsy. The Motley Fool recommends Nasdaq and Synchronoss Technologies. The Motley Fool has a disclosure policy.
