Earnings season is upon us again, and as companies are releasing their earnings, we are going to offer investors a brief pre-earnings analysis of current and past quarters. Our focus will be on price and how stocks might react after earnings reports based on the recent stock price changes.
We all know it is difficult to predict what a stock might do solely based on information released during earnings. Sometimes stocks go lower after beating estimates, and the reverse is true as well, so it is also important to factor in what smart money has been doing relative to the stock price.
This combination of simple earnings data and price-based analysis can help investors not only understand earnings results, but also anticipate the stock's move after earnings are released.
The following Companies report earnings on October 23, 2013.
Angie's List Inc (NASDAQ:ANGI) is expected to report a loss of $0.20 when the company reports earnings for Q3 versus the $0.32 loss in the same quarter a year ago. Shares of Angie's List are up 28% YTD, even after a 36% drop in the last three weeks. The company recently cut its annual subscriber fees from $40 to $10, which indicates it is having trouble attracting new subscribers at the $40 rate, a serious problem for a company that is losing money. The company gets 75% of its revenues from businesses that advertise on the site, so without subscriber growth, a bump in business advertising seems unlikely. As the current business model continues to be questioned by investors, the free service Yelp (NYSE:YELP) continues to thrive. After the recent selloff, should investors buy shares of ANGI?
Shares of Angie's List were up 138% at one point this year, but the stock is now down over 45% from the highs in early July. The stock has broken below long-term support, which means long-term support is now converted resistance, and as long as the stock remains below converted resistance, as defined in our real time trading report, Stock Traders Daily expects lower levels. That would make ANGI a sell/short at resistance, with risk controls in place if resistance breaks higher.
The Cheesecake Factory Incorporated (NASDAQ:CAKE) is expected to report $0.52 per share when the company releases earnings on Wednesday October 23 after the market close. The company missed its Q2 estimates by $0.03 when it reported a profit of $0.54 in July. The company lowered guidance and gave a more cautious outlook. Investors will watch as competitors report earnings to see if CAKE's last quarter report was result of the industry weakness in June and July or something company specific. Positives were that food margins were better than expected, and the company increased its dividend by 17%. Should investors buy shares of CAKE ahead of earnings?
The stock recently tested support as defined in the real time trading report issued by Stock Traders Daily, and support held, but most importantly the stock has also already begun to move higher. By definition we prefer to buy near support levels when they are tested because that allows us to maximize our return. Our target is resistance and we want to get the complete oscillation from support to resistance, but it also helps us control risk, and that is the most important part. Shares of CAKE are trading above support after the recent test of support, and it is far enough away from support to be unattractive to us as a new buy, especially ahead of earnings. We would avoid buying the stock at current levels, and instead watch support for a better entry level.
Citrix Systems, Inc. (NASDAQ:CTXS) is scheduled to report its Q3 earnings on Wednesday after the market close. Analysts are expecting the company to post a profit of $0.70 for the quarter, which would be $0.02 better than the same quarter a year ago. The stock is down about 12% YTD, and recently announced that it expects to report third quarter revenues of $710 million to $712 million, below prior guidance of $730 million to $740 million. Many analysts have since downgraded Citrix Systems, and the stock has fallen hard on the news. Is the recent dip a buying opportunity ahead of earnings?
According to the real time report offered by Stock Traders Daily, long-term support has just broken lower, which raised sell/short signals. Support is now converted resistance, and as long as shares of CTXS remain below converted resistance, we expect shares to trade lower. CTXS remains a sell/short, with risk controls in place if resistance breaks higher.
Skechers USA Inc (NYSE:SKX) is expected to report its Q3 earnings on Wednesday after the bell. The company is expected to report a profit of $0.62 versus the $0.22 it reported in the same quarter a year ago. Skechers last issued its quarterly earnings on July 24. The company reported $0.14 earnings per share for the quarter, beating the consensus estimate of $0.03 by $0.11. The company had revenue of $428.20 million for the quarter, compared to the consensus estimate of $427.62 million. During the same quarter in the previous year, Skechers posted a loss of $0.04. The company's revenue for the quarter was up 25.6% on a year-over-year basis. The stock is up 56% YTD, but has pulled back about 8% from the 52-week highs last month. Are shares of Skechers a good buy ahead of earnings?
The stock tested support on October 7 and held, based on the real time trading report issued by Stock Traders Daily, but it is important to note that the stock has also already begun to move higher. By definition we prefer to buy near support levels when they are tested because that allows us to maximize our return. Our target is resistance and we want to get the complete oscillation from support to resistance, but it also helps us control risk, and that is the most important part. Shares of SKX are trading above support, after the recent test of support, however the stock is far enough away from support to be unattractive to us as a new buy. We would avoid buying the stock at current levels, and watch support for a better entry point.
Navigating earnings can be tricky, sometimes investors' earnings expectations are correct, but the stocks actually do the opposite of what they think they should have done after earnings, so our opinion based on price can help investors make more well-rounded and sound investment decisions.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: By Neal Rau for Stock Traders Daily and neither receives compensation from the publicly traded companies listed herein for writing this article.