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Fly News Breaks for April 1, 2019
BBY, CRCM
Apr 1, 2019 | 20:23 EDT
BTIG analyst Marvin Fong downgraded Care.com (CRCM) to Neutral from Buy citing the fallout from the Wall Street Journal's reporting on the company. The stock closed the trading day down 7%, or $1.31, to $18.45. The analyst sees "tangible fallout" after learning that Best Buy (BBY) has suspended its back-up care offering provided by Care.com's Care@Work unit. Fong, however, emphasizes that Best Buy has suspended the service, not terminated it. Best Buy told the analyst, "We are doing our due diligence to make sure Care.com is still a good choice for this benefit." While Best Buy could reinstate Care@Work at any time, it is prudent to trim Care@Work estimates to "reflect the current reality," Fong tells investors in a research note. He believes Best Buy's decision may impact the future trajectory of Care.com's back-up care business. Further, the Journal has made Care.com a "favorite target" with three articles within the span of about three weeks, says Fong. Given the importance of reputation to Care.com's model, the risks to the stock "are becoming increasingly difficult to assess with confidence," contends the analyst. While Care@Work is just 9% of the company's revenue, it accounted for 25% of its growth in 2018, he points out.
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