It may be surprising to some, but 2012 is almost over. November just has a few days left, so we're entering the final month of trading. A fair amount of people will be rushing to the malls and battling over parking spaces. Those that do a majority of their shopping online may have some more free time. Some may think that December may be a slow month for the markets. But with the fiscal cliff issue and problems in Europe still lingering, I think it will be a fairly hectic month. That being said, here are five stocks to watch in December.
The athletic apparel retailer will report its fiscal third quarter results on Thursday, December 6th, before the bell. The Canadian company, known best for its line of yoga products, has been one of the fastest growing names in this space. That growth has carried a high price to earnings multiple, which has led to an extensive debate over the name's valuation. The company closed Wednesday at $73.55. There are those out there that believe it isn't worth $50, and those that believe it will be over $100 next year. Sure, you could say that about any name, but with lululemon trading at 40 times this year's currently expected earnings, it has become one of the big momentum or debate names. The stock is currently about 10% away from its 52-week high, which could be eclipsed with a great earnings report.
When LULU reported its second quarter results, the company guided to third quarter revenues of $300 million to $305 million, and earnings per share of $0.34 to $0.36. That compares against $230.22 million and $0.27 in the prior year period. As I noted in my previous article on LULU, the company has been known for providing very conservative guidance. So it is not a surprise that analysts are expecting a bit more, currently looking for $305.05 million in revenues and $0.37 in earnings per share. The company's valuation seems lofty to some, so LULU needs to deliver, since it is held to such a high standard.
Research in Motion (RIMM):
The BlackBerry maker will continue to be in focus as it nears the launch of the extremely anticipated BB10 phones. The stock has had a very wild ride of late. In just the past month, the stock has risen from under $8 to a high of $12 on Tuesday. But the rally fizzled quickly down to $10.20 on Wednesday before a rebound back to $11.10. The important thing to watch will be the company's third quarter earnings report, scheduled for December 20th, after the bell.
If you look at current estimates for the quarter, you would think that they are rather terrible, and on the face of it, they are. However, they have come up a bit since RIMM's second quarter surprise. For the fiscal third quarter, analysts are looking for revenues of $2.62 billion, a decline of 49.8% over the prior year period. But that's up from $2.31 billion going into the Q2 report. Analysts are also looking for a loss of $0.36, compared to a profit of $1.27 in the prior year period. The current estimate is up a nickel from where it was two months ago.
Some may think that the quarter to be reported is meaningless because it all comes down to BB10. While that is true to a point, this quarter is important. If the company beats sales expectations, it means that it is getting rid of its older inventory. The more old inventory it can flush out of the system, the less it will have on hand when BB10 comes. Also, more sales, and potentially more earnings, could help with cash flow. We're expecting to see some cash burn as we head towards BB10, but the company had a solid cash position at the end of the last quarter. If that's still the case, it's a positive for RIMM.
SPDR Gold Shares (GLD):
This isn't a single stock in the traditional sense -- it is an exchange traded fund that attempts to track the price of gold. Gold has had an interesting week, dropping from the mid $1750s earlier this week to almost breaking $1700 today, now trading around $1720.
The reason why gold is in play this month is the Federal Reserve meeting on December 11th and 12th, which includes a summary of economic projections and a press conference by Chairman Bernanke. He stated recently that the Fed cannot fully offset the impact from the fiscal cliff issue that has not been solved. The Fed launched QE3 a few months ago, and with economic data not being great, there tends to be an expectation of QE4 at some point, or some extension of QE3. If more money is going to be printed, gold prices will rise, and this is the most basic way to be in gold.
The global shipping giant will report second quarter earnings on December 19th. FedEx is a good barometer of global growth, and will definitely be looked at to see how the economy is doing. But more important may be clues to how the holiday shopping season is going. With the company's earnings report just a week before Christmas, it'll have a pretty good idea of how things are trending compared to previous years.
For the quarter, analysts are expecting a 2.4% rise in revenues to $10.84 billion. However, earnings per share are expected to drop from $1.57 to $1.41. So far, online sales have done really well, and Cyber Monday was expected to post large gains. Large rises in online sales would certainly benefit the delivery companies, and we'll get an update on that situation in about three weeks.
Apple needs to be mentioned for a couple of reasons. First, its size and the influence it has on the markets. The tech sector had been lagging of late as Apple had dropped about $200 off its high, but a recent rebound has put shares back around $583. With Apple being such a heavyweight in tech-focused ETFs, the theory remains that as Apple goes, so does the market.
The second reason is for the same theme listed above, and that is the holiday shopping season. You can argue that Apple has two or three of the hottest products on the planet lined up for this holiday season between the iPhone, iPad, and new mini iPad. Apple also released new versions of the iPod, iMac, and MacBook Pro. Apple guided to $52 billion in revenues for the quarter, and analysts are expecting about $2.5 billion more than that. That's $4 billion plus in revenue per week, on average. But the key this year will be on some of the lower priced items. The iPad mini starts at just $329, and Apple even has a $599 Mac mini.
But many of the chartists are also looking at what Apple did last December. Apple started the month under $379 and closed out the month above $401. The near 6% rise in December was the start of one of the greatest stock rallies in history. Many believe that this December will be a repeat of last year, with the stock rallying because of the promise of the holiday season. With Apple still more than 17% off its 52-week high, there seems to be plenty of room to run. Analysts certainly think so, with the average price target currently at $757.77.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AAPL over the next 72 hours.
Additional disclosure: Investors are always reminded that before making any investment, you should do your own proper due diligence on any name directly or indirectly mentioned in this article. Investors should also consider seeking advice from a broker or financial adviser before making any investment decisions. Any material in this article should be considered general information, and not relied on as a formal investment recommendation.