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Why J.C. Penney, NetEase, and Jounce Therapeutics Slumped Today

Thursday was a relatively quiet day on Wall Street, and action in different parts of the market showed mixed signals for investors. On one hand, small-cap stocks moved higher, with key benchmarks in that area hitting record highs. Yet the better-known large-cap stock indexes like the S&P 500 gave up early gains. Looking more closely at individual stocks, some companies suffered from bad news that sent their shares falling. J.C. Penney (NYSE:JCP), NetEase (NASDAQ:NTES), and Jounce Therapeutics (NASDAQ:JNCE) were among the worst performers on the day. Here’s why they did so poorly.

J.C. Penney can’t keep up

Shares of J.C. Penney dropped 12%, disappointing investors who had hoped that the discount department store chain would be able to match solid performance from a key industry peer yesterday. Penney suffered a 4% drop in revenue during its first quarter, and even though that came from the closing of almost 140 locations last year, comparable-store sales gains amounted to just 0.2%. Penney’s bottom line swung to a loss on an adjusted basis, due largely to weak margin figures. CEO Marvin Ellison blamed unseasonably cold weather in the early spring for the shortfall, as it left shoppers unmotivated to get a jump on warmer-weather spring and summer fashions. With Penney having cut its guidance on earnings for the full year, investors have to worry about another shoe dropping later in 2018.

J.C. Penney location with outside entrance, shown without customer traffic.

Image source: J.C. Penney.

Game over for NetEase’s growth?

NetEase stock sank over 7% after the company reported first-quarter financial results. Revenue growth for the Chinese video game and e-commerce giant slowed to just 4%, and big boosts in spending sent adjusted net income down 70% compared to the year-earlier quarter. Most of the weakness came from NetEase’s core video game segment, where some of the company’s self-developed games didn’t perform up to expectations. E-commerce efforts continued to go well, but even though that portion of the business is growing, it’s not big enough to overcome challenges with the game division. Until NetEase can demonstrate that it can compete in an increasingly tough environment in China, investors could remain nervous about its prospects.

Jounce gets jounced

Finally, shares of Jounce Therapeutics plunged 35%. The clinical-stage immunotherapy specialist suffered a double whammy, presenting data that wasn’t as upbeat as hoped and also receiving an analyst downgrade. Jounce’s phase 1/2 trial of its JTX-2011 candidate cancer treatment showed good tolerance for the treatment across patients with different types of solid tumors, but many of its response rate metrics weren’t as strong as those watching the company had wanted to see. Analysts at Wells Fargo were especially downbeat, cutting their rating on the biotech stock from outperform to market perform and slashing price targets by 65% to $13 per share. Many have hoped that Jounce would get bought out, but unless that happens, some investors seem scared that further declines are possible.

Mid-Day Market Update: Baozun Rises Following Q1 Results; Jounce Therapeutics Shares Plummet

Midway through trading Thursday, the Dow traded up 0.15 percent to 24,805.86 while the NASDAQ climbed 0.26 percent to 7,417.56. The S&P also rose, gaining 0.25 percent to 2,729.24.

Leading and Lagging Sectors

On Thursday, the energy shares rose 1.34 percent. Meanwhile, top gainers in the sector included Seadrill Limited (NYSE: SDRL), up 46 percent, and Sanchez Energy Corporation (NYSE: SN) up 8 percent.

In trading on Thursday, real estate shares fell 0.34 percent.

Top Headline

Walmart Inc (NYSE: WMT) reported better-than-expected results for its first quarter.

Walmart said it earned $1.14 per share in the first quarter on revenue of $120.7 billion versus Wall Street's estimate of $1.13 per share on revenue of $120.51 billion.

Walmart U.S. comp sales rose 2.1 percent, comp traffic rose 0.8 percent. Comp sales at Sam's Club rose 3.8 percent on a traffic growth of 5.6 percent. Online sales also grew 33 percent in the quarter which marks a reversal from the prior quarter's disappointing performance in the prior quarter.

Equities Trading UP

Carver Bancorp, Inc. (NASDAQ: CARV) shares shot up 88 percent to $6.88.

Shares of Loxo Oncology, Inc. (NASDAQ: LOXO) got a boost, shooting up 21 percent to $168.56. The biopharmaceutical company that focuses on medicines for patients with genetically defined cancers said its oral presentation of LOXO-292 was selected for the "Best of ASCO" program.

Baozun Inc. (NASDAQ: BZUN) shares were also up, gaining 17 percent to $52.85 after reporting Q1 results.

Equities Trading DOWN

Jounce Therapeutics, Inc. (NASDAQ: JNCE) shares dropped 32 percent to $12.02. Abstract of the Phase 1/2 ICONIC trial that evaluated JTX-2011 monotherapy as well as in combination with nivolumab showed that the company has met its target enrolment in its combination cohorts across four solid tumor types, namely gastric cancer, triple-negative breast cancer, head and neck squamous cell cancer and non-small cell lung cancer.

Shares of J C Penney Company Inc (NYSE: JCP) were down 9 percent to $2.79 after the company reported downbeat Q1 results and lowered its FY2018 guidance.

Syndax Pharmaceuticals, Inc. (NASDAQ: SNDX) was down, falling around 21 percent to $8.76 after the company issued updated results from Phase 2 ENCORE trial of entinostat in combo with KEYTRUDA.

Commodities

In commodity news, oil traded up 0.45 percent to $71.81 while gold traded down 0.22 percent to $1,288.60.

Silver traded up 0.67 percent Thursday to $16.48, while copper rose 0.65 to $3.0905.

Eurozone

European shares were higher today. The eurozone’s STOXX 600 gained 0.49 percent, the Spanish Ibex Index rose 0.83 percent, while Italy’s FTSE MIB Index rose 0.11 percent. Meanwhile the German DAX rose 0.83 percent, and the French CAC 40 climbed 0.67 percent while U.K. shares rose 0.60 percent.

Economics

Initial jobless claims increased 11,000 to 222,000 in the latest week. Economists were projecting claims to total 215,000 last week.

The Philadelphia Fed manufacturing index rose to 34.4 for May, compared to 23.3 in April. Economists expected a reading of 21.9.

The index of leading economic indicators rose 0.4 percent for April.

Domestic supplies of natural gas increased 106 billion cubic feet for the week ended May 11, the U.S. Energy Information Administration reported. Analysts expected a gain of 104 billion cubic feet.

Federal Reserve Bank of Dallas President Robert Kaplan will speak at 1:30 p.m. ET.

Data on money supply for the latest week will be released at 4:30 p.m. ET.