My twitter stock-picking guru has several different strategies he employs when choosing which stocks to recommend. One of his favorites is trading “former runners,” stocks with a history of rapid, momentum-driven price moves. Earnings are one of the common catalysts for once again putting these stocks “in play,” so here’s a brief look at five “former runners” scheduled to report this week.
EBAY INC. (EBAY)
One of the publicly-traded granddaddies of the internet revolution, EBAY stock has slowly grinded its way higher after the economic downturn took the once high-flying shares of the company to $10 mark. That was in the spring of 2009, when it looked like the world was headed for a depression. Shares have recovered nicely since then, currently hovering around $32.
My prediction: Good earnings will keep EBAY’s share price at its current level or give it a slight boost, while bad earnings would make it a nice short-sale candidate. I’m leaning toward the short-side, given an ongoing tough economic environment, increased on-line competition and the company’s massive 1.15 billion share public float.
Zix CORP. (ZIXI)
On March 1, 2000, some poor soul paid $96.50 for a share of ZIXI, a company that provides secure internet messaging services. Like EBAY, ZIXI was one of the darlings of the internet bubble—but not nearly as successful. Right now ZIXI is trading for about $3.75. Interestingly, the company keeps posting profitable quarters and releasing bullish news. And, like VDSI below, it occupies a nice niche, with computer security constantly in the spotlight.
My prediction: These shares won’t see double digits any time soon, but a nice earnings report could boost them significantly higher for a short term run, with a crack of $5 providing more upside ballast. If the earnings aren’t there, then it’s wait ‘til next quarter.
Vasco Data Security International (VDSI)
I remember watching VDSI trade when it was $2 and just starting to become a “real stock.” In the right place at the right time—computer software and security—it kept breaking higher, and then, at the end of 2008, it simply hit the roof, clearing the $40 per share hurdle. It’s been relatively tough sledding for VDSI shares ever since. That said, 2010 was an extraordinarily successful year, with the company posting quarterly net income of $724,000, $1.56 million, $2.5 million, and $7.5 million respectively. Interestingly, this did nothing for the stock price as it based throughout most 2010 at between $6 - $7 per share. With the recent market bull run, the shares hit $14 before retreating back to the $13. It looks like Q4 2010 will be tough to beat numbers wise, but a sizable quarter-over-quarter earnings increase from Q1 2009 might provide some lift. The float size is 29 million shares, with relatively light short interest of 1.17 million shares.
My prediction: This is a solid company in a high-growth industry, but I’m neutral on any big momentum move in VDSI shares, barring a blowout quarter or other obviously bullish business and/or market developments.
IMAX Corp. (IMAX)
Two years ago it would have been hard to give away shares of this company, as they treaded water at or below $5. Since then, the 3-D revolution that so many people had predicted, for so many years, finally came to fruition. And so did IMAX’s market cap, with the shares currently going for $32 and change. Analyst’s earnings estimates are all over the map, ranging from .05 to .21 for the quarter. Anything close to or exceeding the high estimates could dimensionalize IMAX’s share price even higher.
My prediction: It will be new 52s for IMAX, as it currently sits above the technically key $30 level. Breaks of its 52-week-high of $33, and then its historical resistance level of $35, could send the share price higher, given favorable market conditions.
Pacer International, Inc. (PACR)
Pacer International provides logistics and transportation services to Fortune 500 companies, including Costco, G.E., Home Depot and Procter and Gamble. Despite this enviable client list, PACR’s share price swooned dramatically with the market downturn (from $25 to under $5), and has yet to recover. Analysts don’t expect much this quarter either, with earnings estimates ranging from .00 to .04 cents a share. That said, Pacer remains on the radar screen of traders, attracted by a manageable float size of 34 million shares, with 17.3 percent of those shares sold short.
My prediction: I’m leaning long here, with any earnings “beat” acting as a nice short-term catalyst for share price appreciation. Support at $5 is a key pivot point, so I would wait for the report, then place my bets accordingly.