This upcoming week of February 7 - 11, 2011 features highly important earnings announcements from technology, agriculture, food, entertainment, retail, and financial companies such as Cisco (NASDAQ:CSCO), Toyota (NYSE:TM), General Motors (NYSE:GM), Disney (NYSE:DIS), Coca Cola (NYSE:KO), and others with a tremendous impact on the viability and sustainability of our economic recovery.
The week may prove to be a recap of the past few months' themes of increasing commodity prices, a recovering and growing auto industry, a more confident consumer, and an improving economy. But along with higher commodity prices and the almost-ignored emerging market troubles, companies may begin to reveal their concerns over growth for the future. Since global growth relies heavily on emerging markets such as China, Brazil, and India, and on the continued recovery of the consumer, this week may give us a few hints as to what companies are forecasting and what we should be expecting.
Here are the companies reporting and the stocks to watch this week:
Cisco (CSCO) - After terribly missing investor expectations in November 2010 and warning of some upcoming hurdles, Cisco saw a big drop over the next few days from over $24 to about $19. It has recovered nicely to $22, but is still seeing some overhead resistance at the 200-Day Moving Average among other potential issues. Though it may provide some value and remains a very strong company, the continuous poor performance of the stock may be signaling trouble ahead. We would avoid going long CSCO unless it breaks above $24.50-$25. CSCO may provide some useful information about fellow technology giants like Apple (NASDAQ:AAPL) and Oracle (NASDAQ:ORCL) or the broader Technology space (NYSEARCA:XLK).
Akamai (NASDAQ:AKAM), Rackspace (NYSE:RAX), Veeco (NASDAQ:VECO) - All three set to report this week could shine some light on the state of technology broadly and the cloud computing sector in particular. With companies like AKAM, RAX, and VECO thrown into the mix with the big cloud players like Salesforce (NYSE:CRM), F5 Networks (NASDAQ:FFIV), and even Google (NASDAQ:GOOG), their earnings reports will show us if weakness continues in the cloud space, following a huge miss by FFIV and poor stock performance by many cloud plays (See "'Cloud 9' Computing: Sign of a Renewed Technology Bubble?").
Sprint (NYSE:S) - Once able to compete with the likes of AT&T (NYSE:T) and Verizon (NYSE:VZ), Sprint has had a lot of trouble in recent years - seeing its stock drop from over $25 to as low as $1.35. Sprint is now a recovery play. And while it has some strong resistance above between $4.50 and $5, it may surprise investors this week if it can exceed the low expectations that many have become accustomed to. With a nearby support level at around $4.25, Sprint may be a decent earnings play, and maybe even a better recovery play.
OpenTable (NASDAQ:OPEN) - One of the hottest plays of the year, OpenTable is up over 250 percent in less than a year! It offers an online reservation service which has proven to be quite efficient and profitable. Yet while there is still no apparent weakness in the stock, this week will provide some additional information as to whether or not OPEN's substantial rise will continue.
Activision (NASDAQ:ATVI) - A leader in gaming technology, Activision has been stuck in a range between $10 and $12.50 since March 2009. Though the gaming industry hasn't necessarily been as popular as it used to be, we like ATVI at these levels with an $11 support. If earnings are good, expect price to break above $12.50 in the near-term and begin a new uptrend.
Toyota (TM), General Motors (GM) - Relying heavily on the continued demand from the emerging markets, car companies have been expected to see bigtime growth over the next few years. But as I wrote a while back ("Bumpy Ride Ahead: Sell Ford, Buy Toyota, Avoid the GM IPO"), expectations may be too high. Ford (NYSE:F) has already shown weakness and a potential reversal. I'd prefer Toyota (TM) or Honda (NYSE:HMC) to Ford (F). GM also looks good above $35. Yet while I really liked Toyota at around $70, it may be a little overextended here together with much of the auto space. Watch for a break of either above $86 or below $81. Stay away from Ford (F).
Goodyear Tire (NYSE:GT), American Axle (NYSE:AXL) - Another way to play the auto sector is through the suppliers. If the auto industry continues to perform well, expect these two suppliers to also do well. We'd prefer to play GT and AXL rather than the actual automakers.
Buffalo Wild Wings (NASDAQ:BWLD), Chipotle (NYSE:CMG), Coca Cola (KO), Pepsi (NYSE:PEP), Molson Coors (NYSE:TAP), Kraft (KFT), Cheesecake Factory (NASDAQ:CAKE), Whole Foods (WFMI) - With the prices of commodities soaring, and the inputs of these companies costing more and more, there will be considerable trouble upcoming unless these companies can pass on these higher costs to the consumer. Though we think Chipotle (CMG) and Coca-Cola (KO) should be avoided, Kraft (KFT) and other companies like McDonald's (NYSE:MCD) and Dean Foods (NYSE:DF) may offer decent opportunities in this space. We also think Whole Foods (WFMI) will tell us a lot about the state of the consumer, since a strong consumer is generally required to afford the higher prices of organic foods. Most importantly, however, these food-related stocks will tell us a lot about how commodity prices are affecting companies' bottom line.
Hasbro (NASDAQ:HAS) - Though lagging behind Tyco (NYSE:TYC), Hasbro has been holding at the 200-day moving average near $43. With strong support below, one at least has a concrete exit level. Watch to see if the level holds.
Disney (DIS) vs. Warner Music Group (NYSE:WMG) and Loews (NYSE:L) - At the highest levels ever, Disney has shown plenty of strength in the past few years. At the same time, Warner Music Group has had to deal with the realities of its dying industry. While Disney looks much stronger here than WMG, WMG may be more important this week as it sheds some light onto the music industry's future. Loews (L) could also provide some information on the entertainment industry, but should probably be avoided here. Disney offers the least risk, WMG the most reward.
Expedia (NASDAQ:EXPE) - After severely lagging its competitor Priceline (NASDAQ:PCLN) over the past few years, now may be the first time Expedia (EXPE) provides some added value. With a decent support around $24-$25, Expedia could be a good pair trade together with a short in PCLN, which looks overextended here. Expedia's earnings will let us know the state of the consumer, and whether Priceline continues to gain market share as Expedia struggles.
Agriculture and Commodities
Agco (NYSE:AGCO), Agrium (NYSE:AGU), Teck Resources (TCK) - With agriculture ETFs (AGF, DBA) and companies (MON, MOS, POT) soaring this year, AGCO and AGU should be the focus this week for an insight into how the broader ag space will perform. These companies all look great technically and fundamentally - with steady uptrends and fundamental demand. We still remain very cautious, however, with the overall space. We recommend shorting AGF or buying put options to pair with any long bet in specific companies. We also recommend avoiding TCK, as it is struggling at $65 and is showing some technical divergence and weakness.
Randgold Resources (NASDAQ:GOLD), Rio Tinto (NYSE:RIO) - In the gold and precious metals space, we should keep an eye on GOLD and RIO for some clues into the miners and the overall sector. I have been bearish on Gold (NYSEARCA:GLD) and the miners (NYSEARCA:GDX) for a few months (See "3 Ways to Play the Bursting Gold and Silver Bubble"). These two reports may signal the future direction of gold and many of the miners, such as Newmont (NYSE:NEM), Goldcorp (NYSE:GG), and Barrick Gold (NYSE:ABX).
Badger Meter (NYSE:BMI) - Involved in the water-supply space and potentially the clean-energy sector, Badger Meter has shown weakness so far this year, but may be finding support at the 150 and 200-day moving averages. Watch BMI and similar company Itron (NASDAQ:ITRI) for potentially rewarding investments, and a good way to play the ever-important water sector.
Pioneer Natural Resources (NYSE:PXD) - Though we like PXD's strategies and its helium exposure, we think the stock is overbought at these levels. PXD may prove to be a good shorting opportunity with a stop loss at $97.50. If the energy space (NYSEARCA:XLE) and Oil (NYSEARCA:OIL) continue to struggle, PXD will probably struggle as well.
Evergreen Solar (ESLR) - Though we wouldn't take a risk on ESLR, the company's earnings report this week could shed light on the rest of the solar space - companies like JA Solar (NASDAQ:JASO) and LDK (NYSE:LDK) or even the solar ETFs (NYSEARCA:TAN). Solar stocks would be great buys if the price of oil continues to rise, as clean energy would become a hot topic once again.
Beazer Homes (NYSE:BZH) - Beazer has shown some weakness the past two weeks, but could tell us a lot about the state of the housing market. BZH may be one of the most important companies to watch this week, as the housing market is one of the most pivotal aspects that will determine the direction of the market. Beazer's earnings will tell us a lot about the Homebuilders (NYSEARCA:XHB), especially the smaller ones like Hovnanian (NYSE:HOV).
UBS (NYSE:UBS), Credit Suisse (NYSE:CS), Alliance Bernstein (NYSE:AB) - These three powerhouses may give us some information about the financials (NYSEARCA:XLF). With recent weakness in Goldman Sachs (NYSE:GS), Citi (NYSE:C), and others, we would stay away from the financial space or pair some of our trades through options and/or short sales. Regardless, this week will be pivotal for the financials - which we think are overextended.
Edgar Online (NASDAQ:EDGR), TradeStation (NASDAQ:TRAD) - Involved in public filings of funds, Edgar Online (EDGR) may be a great buy into earnings. TradeStation (TRAD) offers a way to play the "trading-platform" space. Both of these plays are very speculative and potentially risky, but could provide great returns if earnings are good. Play these only if your risk is measured or if you've hedged your bets.
Blue Nile (NASDAQ:NILE) - One of my favorite stocks of the past few months, and one with tremendous short interest, NILE has been one of the ways I have played the diamond sector while also hedging against gold (GLD). If NILE surprises, expect a huge day (See "Forget Gold, Buy Diamonds"). We also like Zales (NYSE:ZLC).
Biotech / Pharma
This week will provide much needed information and insight into some of the most critical sectors in our economy - technology, retail, agriculture, autos, and financials among others. Paying close attention to both the big players and smaller companies in each industry could therefore tell us a lot about the future direction of each sector and the market as a whole. Stay ahead of the overall market by following the individual companies' stories and earnings.