January 7, 2020
Companies sometimes miss the mark when marketing or launching ad campaigns, including overlooked undertones or incorporation of controversial topics. Obvious potential consequences are reduced sales and customer loyalty. As investors, how should we think about a company’s stock when they make a marketing misstep?
Below are examples of four companies with advertising messages that were controversial or not well received.
The fitness company aired a TV commercial where a young, fit woman was gifted a Peloton bike by her husband as a surprise for Christmas. She chronicles a yearlong fitness journey. The commercial came under fire for having sexist & body shaming undertones, as the stock shed 7% of its value in just a week.
December 2, 2019 High: $37.02
December 5, 2019 Low: $30.51
December 9, 2019 Close: $34.34
In a commercial airing for only one day, Kendall Jenner joined in a generic activist protest, grabs a Pepsi from a perfectly curated cooler, and gives it to an officer. Although the cast of protesters were racially diverse, the ad was accused of downplaying the #BlackLivesMatter movement by not portraying the severity of both the protest and current events the movement was founded on.
April 3, 2017 High: $112.36
April 28, 2017 Low: $112.19
April 29, 2018 Close: $109.25
Former San Francisco 49er quarterback, Colin Kaepernick, is well known for kneeling during the National Anthem at a 2016 preseason game and into the regular season to protest racial injustice and systematic oppression, sparking polarizing reactions.
August 1, 2016 High: $55.87
August 30, 2016 Low: $57.85
August 30, 2017 Close: $52.25
After his previous contract had expired, Nike renewed an endorsement deal with Kaepernick and made him the face of 30th anniversary of the “Just Do It” slogan. Kaepernick has not played in the NFL for two years and is a free agent, further sparking controversy during a recently scheduled practice to court NFL interest.
September 4, 2018 High: $80.97
September 28, 2018 Low: $84.25
September 30, 2019 Close: $93.92
Three companies in recent years, does not make an academic sample selection. However, I do think it can speak to the temptation as individual investors trade on headlines. Looking at the price of each company at the beginning of the month of the ad campaign, the end of the month, then one full year later, there doesn’t seem to be much cause & effect correlation.
My thoughts are that controversial and misinformed ad campaigns usually have nothing to do with a company’s financial fundamentals. Companies with healthy financial ratios can easily weather a mishap as controversies tend to be short lived in our daily lives of media overload. Sure, a company could take a hit to their bottom line or goodwill, but companies with any reach and proper PR will likely not need to play complete defense with their stockholders in the long term.
In summary, unless you are a high risk, high reward investor with an affinity for day trading, purchasing a company’s stock immediately after a media mishap on bad press alone doesn’t appear to be the surest bet to make a quick return.
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