This is the fourth 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 five snapshots of momentum movers scheduled to report earnings next week, and my handicap of how their stock prices might perform.
Ctrip.com International (CTRP)
Somehow CTRP has managed to avoid the taint of fraud that has absolutely leveled a huge percentage of U.S. exchange-traded stocks of companies based in China. Maybe that’s because the company is real, has a nice niche carved out with its focus on travel to China, and continues to deliver growth-stock caliber earnings. That said, despite the company’s nice earnings report from last quarter, CTRP predicted slower revenue growth for the quarter ahead. It also faces heavy competition and hugely uncertain economic conditions worldwide.
My prediction: As a darling of many investment houses and mutual funds, CTRP has enviable institutional support and a relatively small percentage of short sellers betting against it. Without a meaningful earnings beat, however, my hunch is the stock will hold steady around these levels, but won’t offer much momentum movement. That said, a solid upside earnings surprise could send CTRP shares north, in pursuit of new 52s.
Cimatron, Ltd. (CIMT)
Cimatron, an Israeli company, designs, develops, manufactures, markets, and supports computer-aided design/computer aided manufacturing (CAD/CAM) software products. It’s a relatively small enterprise, but business at CIMT has been good recently, with the fourth quarter of 2010 resulting in record-breaking profits. 2010 saw the company earn .32 cents a share vs. .01 cent a share in 2009. Those are nice numbers, and market participants took notice at the end of last year, running the stock price up through $5 before profit-taking set in. CIMT’s public float is razor thin, listed at about 2.5 million shares, and has frequently been in the crosshairs of momentum traders through the years.
My prediction: The “backing and filling” process that’s underway, otherwise known as consolidation, may take CIMT shares even lower before earnings, especially if the price dips below $3. However, I’m betting that Cimatron will continue to deliver earnings that tantalize investors, resulting in another round of rapid price appreciation, similar to its last run higher at the start of the year. This one’s a momentum player’s dream—the kind of “former runner” that traders never forget. If earnings are bad, however, then you should forget about CIMT for the time being.
Hott Topic (HOTT)
To say that the share price of Hott Topic has been sizzling recently would be an understatement. Trading at around $7.70 per share, and regularly knocking down new 52-week highs, HOTT stock has been absolutely en fuego. Same store sales at HOTT in April were up an impressive 10.5 percent, and that has added fuel to the fire. I’ve never been a big fan of retail stocks as momentum plays, but right now this one has some street cred.
My prediction: In real estate it’s all about location, location, location. In retail it’s all about earnings, earnings, earnings. Those earnings, of course, are so dependent on so many different factors that I hesitate to look at HOTT as a slam dunk going into their next quarterly report. Although current price movement may reflect good news to come, there may be a sell-the-news response no matter what kind of numbers HOTT delivers. I’m neutral, but would be inclined to ride this elevator up in the wake of a stellar report.
Petsmart, Inc. (PETM)
Petsmart’s the kind of stock that my dad would’ve urged me to buy and hold onto, using the inevitable gains to feather my retirement nest. Being impatient by nature and a daytrader by occupation, it’s the kind of stock I haven’t paid much attention to in recent years. In fact, the last time I looked at shares of PETM they were going for under $20 a pop. I thought they were overpriced then. Now they’re going for well over $40, and are considered “investment grade” by institutions everywhere. The stock also enjoys the luxury of good earnings, an accelerating share price, and consideration as a “defensive play” during uncertain market times.
My prediction: It’s hard to imagine business suddenly going south when it comes to selling animal food and supplies. People simply love their pets, like I love our family Golden Retriever Donut. I don’t shop at Petsmart because we have less expensive alternatives nearby, but the company is the 800-pound gorilla in the space. Unless earnings miss or the market tanks, these shares will go to $50-plus by the end of the year. A continued market pull back may offer a better entry price, however, for patient investors.
This is another in a long-line of internet heavyweights. In case you didn’t know, Salesforce.com provides customer and collaboration relationship management (CRM) services to businesses and industries worldwide. The company also offers a technology platform for customers and developers to build and run business applications. It’s been a highly successful survivor of the internet stock bubble, currently rading at around $130 per share, with a 52-week-high water mark of over $170 per share.
My prediction: No matter how great CRM’s numbers are, this stock has outgrown the days when momentum players could apply buying pressure and run up the price at will. Their recent $326 million acquisition of social media tracker Radian6 will probably take some time to work itself through the integration process, and the lofty float of 130 million shares simply doesn’t lend itself to quick moves to the upside. Unless earnings are great or overall market averages boom, I look for CRM shares to move sideways, or slowly higher, at best.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.