So much for a depressing and uneventful winter. Despite the fact that it's been well below freezing the past week for the New York City area, markets are heating up. Earnings season is fully upon us, and there are plenty of debates going on in Washington, like the debt ceiling one. Despite one of the biggest names on the Street plunging this past week, the S&P 500 (SPY) is back above 1,500, and the Dow Jones Industrial Average (DIA) could make a run at 14,000 this week. While it might be just 10 or 20 degrees outside, the temperature of today's market is much higher, and it won't cool down anytime soon. Here are five names to keep an eye on this week.
When the biggest name on the Street drops 12% in a week after a 29% drop prior to that, it is going to make news. Apple didn't report a bad quarter this time around, but the stock still fell. $54.5 billion in revenues and a profit of $13 billion dollars just wasn't enough. Let me say that again. A profit of $13 billion dollars, more than $1 billion dollars per week, was disappointing to many. It didn't help that Apple's guidance for fiscal Q2 was below expectations, but is that really a surprise? If you were surprised by this, you don't know Apple. This time around, Apple beat its revenue guidance by 4.83% and its earnings per share guidance by 17.53%. Apple said it is going to provide more realistic guidance, but it has been doing that the past few quarters, and still it has been fairly conservative.
Apple shares closed on Friday at $439.88, the lowest close in about a year. Will the stock rebound this week? Well, it all comes down to what the analysts do. If we continue to get negative reports about the "death of Apple," shares are likely to continue lower. Analysts have continued to take a hacksaw to their estimates, and that might continue to happen based on Apple's guidance. Back on January 3rd, Apple analysts were expecting fiscal Q2 revenues of $47.06 billion and earnings per share of $12.15. Going into the Q1 report, those numbers had been lowered to $45.63 billion and $11.70, respectively. Current estimates call for $43.18 billion and $10.37, respectively.
Since Apple started falling, and more so since the earnings report, everyone has been asking me what they should do with their Apple shares. Well, every investor's situation is different, and it really depends on where you bought Apple. But I pose these questions to all that want to know if they should sell Apple. First, if you sell Apple, do you have somewhere else to put the money? Do you have another stock you want to buy now, or are you just planning on holding cash? If you are just going to hold cash, is it worth holding Apple for a 2.41% annual yield, and the potential that shares rebound? Finally, what is your opinion of Apple? I can throw out a million reasons to buy, and even sell, Apple currently. But in the end, it is your decision and your money. What do you think of Apple?
Apple is definitely a stock to watch closely this week. There's another important reason to watch it this week, which I'll cover later on.
The automaker will report its fiscal fourth quarter and full year 2012 results on Tuesday morning. Investors will be closely watching two items: sales trends in North America and any improvement in the European business. Ford could potentially have lost $2 billion in Europe during 2012, and it will be a couple of years before the company is profitable in the region.
Current estimates call for fourth quarter revenues to rise from $32.60 billion to $32.96 billion, a rise of 1.1%. The quarterly profit per share is expected to rise from $0.20 to $0.26. For the full year, analysts are expecting a 2.5% decline in revenues to $125 billion. The yearly profit is expected to fall even faster, from $1.51 to $1.34 per share.
Analysts and investors will be looking for signs of improvement. Current estimates call for a 4% rebound in revenues to $130.72 billion during 2013, and profits to rebound to $1.46 a share. Investors seem to be fairly positive on Ford, as shares have soared roughly 50% over the past six months. Even with that large rise, the dividend still yields roughly 2.9%.
SPDR Gold Shares (GLD):
If earnings season wasn't enough for you, how about a busy week on the economic front? The December jobs report will be released this week, with analysts currently expecting about 180,000 jobs to be added, and the unemployment rate to tick down to 7.7%. We'll also get the December Durable Goods report, December Pending Home Sales and the November Case-Shiller Index, January Consumer Confidence, and an advanced look at Q4 GDP -- just to name a few. There's even more data to be released this week, but I won't go into everything, as you can check out the link above.
But even if earnings season and the flood of economic data weren't enough for you, we also have a meeting of the Federal Reserve! That's right, Uncle Ben and his crew will hold a two-day meeting on Tuesday and Wednesday. What will they have to say about the economy this time around, and what have they seen as a result of the fiscal cliff and debt issues? Gold was over $1,690 an ounce early last week, but took a dive throughout the week, closing under $1,660. It's not out of the question to see $1,700 again this week, depending on what the Fed says.
Research In Motion (RIMM):
The BlackBerry maker is going to officially launch the BlackBerry 10 line of products on Wednesday, the 30th. Many believe that the future of this company is dependent on BB10. If things go well, this company will be back from the dead, and could start to regain some of its lost market share. But if these devices don't sell well, this company is most likely doomed. This is the second reason that Apple is on this list, as the BB10 will be a competitor to the iPhone. While BB10 won't kill the iPhone anytime soon, any lost iPhone sales will fuel the "Apple is dead" fear that seems to be out there currently.
A couple of weeks ago, I asked if it was possible that RIM shares would see $20 before the launch. At that point, we were a bit under $15, and I should have bought some myself. While we haven't gotten to $20 just yet, shares did trade for more than $18.30 at one point last week. It wouldn't take much to get them to $20 at this point. We're a lot closer now than we were a few weeks ago.
Part of my logic was that short sellers could get nervous going into the BB10 launch, and a huge short squeeze could send the stock much higher. From the end of April 2012 to the end of 2012, the number of shares short in Research in Motion skyrocketed from 53.7 million to more than 137 million. That's a rise of more than 155%. As of the end of December, approximately 26.1% of the more than 524 million shares outstanding were short. That's a substantial amount of shares short, and there are a lot of non-believers out there. At the beginning of November, the short count was roughly 95.4 million. At the beginning of December, it was up to 113.7 million. The count rose by another 23 million plus in December. The latest update on short data had less than 2 million shares covered, with still more than 135 million shares short. RIM shares have jumped about $3 since the last update on short data, so I would think that maybe some shorts did cover. If they haven't, a potential short squeeze could push shares to $25, and not just $20.
The aircraft manufacturer has been on the hot seat lately thanks to all of the problems surrounding the 787 Dreamliner. The plane has been grounded until all investigations are complete, and depending on what the actual issue turns out to be, this could be very costly for the company. The Dreamliner issue makes this Wednesday's earnings report all the more interesting. You can expect this conference call will be full of questions, and I'm guessing most of them won't have to do with the Q4 and 2012 results we will receive.
But since I'm a numbers guy, I must discuss expectations going in. For the fourth quarter, analysts are looking for a 14.3% rise in revenues to $22.36 billion. However, earnings per share are forecast to drop from $1.83 to $1.19. For the full year, analysts are looking for a rise in revenues by 18.9% to $81.75 billion. However, earnings per share are expected to decline from $5.33 to $5.01.
The real question, though, could be the impact on 2013 sales and earnings if there is a major problem with the Dreamliner. Not only could a fix be rather costly, but the company could lose a fair amount of future sales as well. Analysts are looking for revenues to increase by another 7.9% in 2013 to $88.19 billion, and a slight rise in earnings per share from $5.01 to $5.13. But that might all depend on the Dreamliner.
Disclosure: I am long NUGT.
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.