This is the third in my pre-earnings series on "momentum movers" — stocks which have made large, and even parabolic price moves in the past. A few years ago my Twitter stock guru pointed out that when a stock has a history of advancing quickly, history frequently repeats itself, and earnings often serve as a catalyst for those moves. Since then, I’ve kept a watch list of these issues. Here are 10 snapshots of momentum movers scheduled to report earnings next week, and my handicap of how their stock prices might perform.
ATVI is one of those companies that in many ways has lived up to some very lofty expectations. Shares of ATVI have risen from relative obscurity at the turn of the century ($2 per share), to its current price of around $11.30. Despite some hiccups, it’s been a steady climb up for ATVI, and the company –which makes popular video game titles — is reaping the benefits of one of the more solid video gaming markets in recent memory.
My prediction: In the face of fierce competition and a huge float of1.18 billion shares, ATVI’s momentum days are over. It would take a big earnings beat to quickly move the share price of this wooly mammoth. Traders already have their favorites in this space — MCZ and COOL — and that’s where the momentum money will most likely remain.
Clean Energy Fuels (CLNE)
By now most market participants are familiar with Clean Energy Fuels (CLNE) — T. Boone Pickens’ lovechild that has catapulted natural gas into the forefront of the clean energy frontier. During 2009, CLNE stock began a rapid climb from a $5 per share base, ultimately hitting a 52-week-high of $19.36 last summer. Since then, with the price of oil and refined gas spiking, the spotlight is again shining brightly on the need for both more and cleaner energy.
My prediction: The use of natural gas to power vehicles is here to stay and this company is the North American leader, with deep pockets. Regardless of CLNE’s earnings results, CLNE stock should gradually rise through the years as a solid buy and hold idea. That said, a good immediate earnings outlook could re-ignite serious buying interest in CLNE. I’m leaning long here, looking for the break of $20 to launch the share price higher. And even if earnings aren’t good, I’m not sure there’s much long-term downside risk.
Cisco Systems (CSCO)
No need to remind anyone about CSCO’s long and storied history. And of course the days when CSCO would move up or down several bucks or more in a heartbeat are long gone. But during earnings time, big industrial issues like CSCO offer some upside value to the momentum crowd. The play here is to bet for or against an earnings-related share price move, which involves buying and holding the shares prior to the earnings release.
My prediction: Ongoing market strength could lead to a nice post-earnings jump in the price of CSCO shares. I’d play small here, but I’m leaning toward a long position with the goal of getting that bump and scalping some small profits.
eMagin Corp. (EMAN)
eMagin Corporation makes "OLED microdisplays," which is another way of saying that they’re in the LED business. LEDs are used everywhere — on computers, TVs, watches, alarm clocks, and for dozens of other applications. Not coincidentally, shares of EMAN have been lighting up investor’s accounts, rising rapidly from a $1 to a recent 52-week high of $9.31. EMAN currently sits at about $8 per share.
My prediction: Shares of EMAN have been on an epic tear over the past year, but the company has already pre-announced earnings expectations for the quarter, which will be impacted by an operational slow-down due to equipment maintenance. I like EMAN long-term, but suspect that a weaker-than-hoped for quarterly report will lead to some lower-price consolidation. I’m leaning short.
Fonar Corporation (FONR)
FONR has always been a classic low-float special, momentum mover. It generally doesn’t get much, if any attention, until other low float plays come into vogue — and this usually happens when market conditions are happy, like they are now. All you really need to know about FONR is that is has a Lilliputian-sized public float of 4.7 million shares and a history of quantum price leaps and drops.
My prediction: This one’s a bit of a crap shoot, but I would monitor earnings closely, and look for buying interest to kick in prior to the announcement. Also keep track of other low-float issues, and if they also start to attract trading interest, it might be time to take a shot at FONR for a quick share flip.
Force Protection (FRPT)
In the wake of 09/11 and the Iraq War, FRPT was embraced by market participants as an up-and-coming defense contractor, in the right place at the right time, making ballistic-proof vehicles. After a series of dizzying ups and downs, the stock steadied above $15 per share in 2007, almost hitting $30 at one point that year. Since then, the only thing that’s blown up at FRPT is its stock price, which currently rests at about $4.50. Despite the fact that the company’s sales fell by $300 million last year, they managed to post a 2010 profit of .22 cents per share.
My prediction: Although short interest has waned, I wouldn’t bet the house that things get much better at FRPT any time soon. Good earnings could trigger some momentum buying, but anything short of that will most likely keep the FRPT’s share price pinned down in the under-$5 foxhole for the foreseeable future.
If you’re a stock trader and you haven’t heard of "rare earths," then perhaps you were traveling in interstellar space. Molycorp, a recent IPO, is the 800-pound-gorilla in the rare earth space, and as gorillas are wont to do, it’s been eating up everything in its path — with shorts the main prey that MCP feeds on.
My prediction: Although it will be many moons before MCP is profitable, it’s in a story stock sector, has a relatively small public float (43 million shares) and has already mined a massive coterie of disbelievers, with 9 million shares sold short. To make a long story short, I wouldn’t want to be short MCP, especially in these ebullient market times. It’s currently trading at $73 and change, and is more volatile than Charlie Sheen, but don’t be surprised to see MCP at $100 or more this year. This one’s risky though, and should not be played by inexperienced hands.
NetSol Technologies (NTWK)
NetSol Technologies is an oldie that occasionally turns into a goodie. The company makes software solutions for a variety of applications, with a focus on automobile leasing and financing. Although their earnings are slightly erratic, NTWK was profitable throughout 2010, but is trading at a very momentum friendly price of around $1.75.
My prediction: I’d monitor this one closely as earnings approach. If NTWK can maintain a profitable trend, I wouldn’t be surprised to see the share price accelerate fairly quickly, and actually hold at higher levels. This one needs big volume to move, but I’m leaning long.
QuePasa is an online social networking company targeting the huge demographic of young Hispanics. What’s happening with QuePasa stock is its typical pattern of major price swings up and down, It sports a tiny float of 11.9 million shares, short interest of almost 2 million shares, and the ongoing attention of momentum traders far and wide.
My prediction: If the markets continue to knock down and establish new multi-year highs, shares of QPSA may get lathered up, take aim at the $10 mark and move higher from there, especially if earnings improve. That said, there’s a reason why so many shorts have lined up against this company, which right now is money loser, so I would tread extremely carefully in QPSA’s waters.
ZAGG Incorporated (ZAGG)
ZAFF makes and sells protective covers for computers and handheld electronic devices, including Apple (AAPL) products. Lately the trajectory of ZAGG’s share price has sent shorts running for cover as well — and there are a heck of a lot of them. Almost 50% of ZAGG’s relatively small 16.4 million share float has been sold short.
My prediction: If I was short ZAGG I would run for cover as quickly as possible. Only an earnings bust or a market meltdown could stop this potential juggernaut from taking flight. If you have a high tolerance for risk, I’d suggest betting long.