By Neal Rau
The reaction to the earnings reports for high-beta names has been mixed, and a few important ones are still set to report. Our analysis includes both a fundamental and price-based analysis to help investors understand what they should be doing ahead of earnings.
The following Companies report earnings on November 7.
Priceline.com Inc (PCLN) is expected to earn $16.22 per share for its third quarter this year, which would be a 31% increase versus the $12.40 the company earned in the same quarter a year ago. Priceline has been one of the strongest momentum stocks over the past 5 years. In recent news the company announced a partnership with Schedulicity to power its newly launched feature to book travel. The partnership will give over 7 million Schedulicity consumers access to hotel, airline and rental car services through the Priceline Partner Network. The stock is up 76% YTD and expectations will be high going into earnings. Is PCLN still a buy at current levels before earnings?
Shares of PCLN have been on a steady rise, but trading below the all-time highs made a few weeks ago. Right now, the stock is sitting in the middle of a channel according to our real time trading report for PCLN, so it does not look attractive as a buy ahead of earnings. 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, which is very important when you're dealing with a momentum stock like PCLN. When stocks are in the middle of a channel like this one they become less attractive, from a risk control perspective, especially ahead of an earnings report. We would advise using patience and looking for a better opportunity near support.
Radian Group Inc (RDN) is expected to report a loss of $0.10 per share when the company reports Q3 numbers on Thursday November 7 before the market open. A year ago in the same quarter, the company posted a profit of $0.11 per share, when analysts were expecting a loss of $0.48 per share. Radian announced that it entered into a Master Transaction Agreement with Freddie Mac on August 29, 2013. The Agreement eliminates Radian Guaranty's claim exposure on 9,756 loans that were delinquent and 4,586 loans that were re-performing as of July 31, 2013. The Agreement caps Radian Guaranty's total exposure on this group of loans. The stock is up 137 % YTD and trading near yearly highs. Should investors buy, sell or hold ahead of earnings.
Even if Radian is able to beat estimates on Thursday, investors cannot count on the stock going up, as stock price matters. Smart money could be looking to take some profits off the table. Shares are up over 410% in the last two years, and close to testing long-term resistance. If the stock tests resistance, and remains below resistance, as defined in our real time trading report, Stock Traders Daily expects lower levels and a test of support. That would make RDN a sell/short at resistance, with risk controls in place if resistance breaks higher.
Groupon Inc (GRPN) is expected to post a profit of $0.01 for its third quarter when the company reports earnings on Thursday November 7 after the bell, which would be $0.02 less than the $0.03 the company reported in the same quarter a year ago. Investors will be looking for a continuation of strength in the US, and indications of further growth in international results could be a bonus. A key for the stock will be if the company can succeed in the Goods segment competing against Amazon.com, Inc. (NASDAQ:AMZN) which remains a question mark. Should investors buy shares of Groupon ahead of earnings on Thursday?
The stock recently tested support as that is 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. Shares of GRPN have increase over 13% in the last week. 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 GRPN are trading above support after the test of support last week, but 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 be patient and watch support for a better entry level.
Nvidia Corporation (NVDA) is expected to report earnings on Thursday November 7 after the market close. Analysts' estimates are for the company to earn $0.20 per share versus the $0.33 per share that the company earned in the same quarter a year ago. Nvidia's margins are looking to be soft, as the company will likely be pressured to cut prices in order to compete with Advanced Micro Devices, Inc. (AMD) new lower priced GPU's. Nvidia knows it must move beyond its core PC gaming market to other attractive markets. As a result the company is moving into mobile and they just released their first ever gaming device, called the Shield. NVDA says everything it has shipped so far has sold out. In addition, NVDA has been getting into the automotive infotainment segment which management believes could be a $1 billion annual business for them in a few years. Should investors buy, sell or hold shares of NVDA before the earnings release?
Shares of NVDA are up about 23% YTD, but the stock has been fallen more than 6% in the last few weeks. Based on the NVDA real-time trading report published by Stock Traders Daily, the stock recently broke below support, which means support is now converted resistance, and as long as the stock remains below converted resistance, as defined in our real time trading report, we expect lower levels. That would make NVDA a sell/short at resistance, with risk controls in place if resistance breaks higher.
Navigating earnings can be tricky, sometimes investor's earnings expectations are correct, but the stocks actually do the opposite of what they think it should have done after earnings, so our opinion based on price can help make investors make more well-rounded and sound investment decisions.