It was a bit of a roller-coaster ride for stocks today. Despite the continuing saga in Europe, the S&P 500 (S&P Indices:.INX) started the morning strong, only to fall by mid-afternoon but mount a comeback late in the day. When all was said and done, it finished down by 3.76 points, or 0.24%.
Video game maker Electronic Arts Inc. (NASDAQ:EA) led the laggards, finishing lower by a staggering 8.3%. The impetus for the move was an announcement that CEO John Riccitiello has been shown the door. According to Chairman Larry Probst, “We have mutually agreed that this is the right time for a leadership transition.” That’s corporate-speak for “You’re fired.”
Will this turn things around at the ailing game maker? Probably not. Electronic Arts Inc. (NASDAQ:EA)’s problem isn’t that it was poorly led per se. Among other things, it hit a 52-week high just last week and beat bottom-line estimates in all six of the most recent quarters. The problem is rather a general malaise in the overall video game market. As my colleague Rick Munarriz pointed out, analysts predict that revenue and profitability will decline this year at Electronic Arts Inc. (NASDAQ:EA)’s larger rival Activision Blizzard, Inc. (NASDAQ:ATVI). And GameStop Corp. (NYSE:GME), the bricks-and-mortar video game retailer, has repeatedly lowered its same-store sales estimates over the past year. It’s likely for this reason that shares went down on the announcement.
Another worst-performing stock today was Juniper Networks, Inc. (NYSE:JNPR). Shares of the networking company fell by 5.3% on the heels of an analyst downgrade. Simona Jankowski of Goldman Sachs Group, Inc. (NYSE:GS) slapped a sell rating on Juniper, citing “competitive and disruptive pressures.” According to MarketWatch.com, Jankowski “pointed to a new Cisco Systems, Inc. (NASDAQ:CSCO) product launch in February, and the continuing shift to software-defined networking, a trend that is also seen posing a threat to Cisco and other hardware companies.”
Earlier this month, fellow Fool Richard Saintvilus wrote an article that’s largely in line with this thinking. Comparing Juniper to Cisco, Richard wrote: “There’s no way this stock should command a price-to-earnings ratio of 57, especially when Cisco wins in every meaningful category such as return on assets, return on equity, operating cash flow, margins — you name it.” He went on to note that the good news is that Juniper should “benefit from a slight bump in carrier spending. But it’s anyone’s guess when that is going to return.”
Finally, rounding out some of the worst performances today, shares of Chesapeake Energy Corporation (NYSE:CHK) finished the day down by 5.1%. Like Juniper, Chesapeake found itself on the business end of a downgrade. Analysts at Sterne Agee rated it as an underperform, saying that its shares “appear more than fully valued at the current price.”