Quarterly earnings are probably the most regular source of stock price volatility. Post-earnings stock price moves are not strictly functions of the reported earnings. Instead, price moves depend on the differential between actual results compared to expectations as well as management forecasts, stock market sentiment, broad market conditions and stock sensitivity to macro and stock market moves.
The following stocks could be primed to pop after reporting earnings on Wednesday. As such, investors would be wise to pay close attention. Not only are these stocks primed for big moves, they could also affect their industries as well as the broad market.
American Express (NYSE:AXP) is the premiere credit card company in the world. Despite trading close to 52-week highs, it has still been hampered by investor negativity about the finance industry. The company trades at cheap valuations considering its high return on assets and low valuations. The company has a trailing P/E of 14.10, a forward P/E of 12.17 and return on assets of 3.03%. Earnings could be a key catalyst for multiple expansion on the stock price. Considering the strength in Capital One (NYSE:COF)'s results and considering the strength in credit card segments at various other banks, there is potential for an upside surprise from AXP. In addition, the company works well as a financial play with a strong enough global brand for international growth.
Investors should watch for revenue growth, especially in non-interest revenues such as card fees and travel commissions. This area has been a major driver of growth at AXP. During the quarter ending Mar. 31, non-interest revenues grew 12% from the year ago quarter. Investors should also watch for expense growth. While revenue growth is a great headline, expense growth that outpaces revenue growth could be a negative long term trend for shareholders.
8x8 Inc. (NASDAQ:EGHT) is a telecommunications over internet protocol company that could be primed for upside if it can deliver on the market's optimistic expectations. EGHT has a trailing P/E of 44.55, a forward P/E of 21.21 and a PEG ratio of 1.10. In the year ending March 31, the company grew revenues 11% to $70.16 million. Net income during this period was $6.5 million, but this figure continues to be inflated by beneficial tax treatment. As of March 31, the company had 24,000 business customers who use the services as a primary telephone system. While the company is expected to grow into its valuations, another potential catalyst is a potential buyout. With its broad customer reach, it could be viewed as a cheap source of growth for a larger strategic partner.
EGHT has an interesting collection of shareholders, including Renaissance Technologies, Archon Capital Management and McKinley Capital Management.
eBay Inc (NASDAQ:EBAY) was once one of the technology world's high-flying stocks but more recently it has flown under the radar. The online auction site still trades at above average valuations, but the depressed sentiment and investor expectations set up this company for potential upside. Trailing P/E is 22.97, forward P/E is 14.50 and profit margins are 19.77%.
EBAY has shown consisted revenue growth. In 2010, revenues grew 4.9% to $9.15 billion. Strong earnings as well as continued growth in the payments division could drive the stock higher.
F5 Networks Inc (NASDAQ:FFIV) trades at a trailing P/E of 45.71, a forward P/E of 25.44 and a PEG ratio of 1.33. The networking company seems finally on pace to deliver on its rich valuations. In 2010, revenues grew 35% to $882 million. This pace appears to be accelerating, as revenues from the trailing 12 months are $1.03 billion.
Ultimately, the company is clearly an expensive stock versus other notable technology stocks like Cisco Systems (NASDAQ:CSCO) and Hewlett Packard (NYSE:HPQ), but against more comparable companies like Riverbed Technologies (NASDAQ:RVBD) and VMWare (NYSE:VMW), F5 offers a discount to the general space.
Chip giant Intel Corp (NASDAQ:INTC) trades near its 52-week high and is approaching its pre-financial crisis highs, but its valuations are depressed largely because of macro economic fears as well as concerns that tablet devices are hampering personal computer growth. These concerns are real, but considering the current valuations and the still strong fundamental results at INTC, the stock could be primed for upside and the upcoming earnings report is a catalyst. Between 2008 and 2010, sales jumped 16% to $43.62 billion.
Intel trades at a trailing P/E of 10.40, a forward P/E of 9.31 and a PEG ratio of 0.83. These are surprisingly low figures considering the company's growth and stunning profit margins of its underlying business. In the trailing 12 months, the company generated profit margins of 26.4%.
Wireless communications product and services company Qualcomm Inc (NASDAQ:QCOM) is one of the major players in the technology industry. The company's stock trades at a trailing P/E of 23.81, a forward P/E of 15.63 and a PEG ratio of 1.04. Between 2008 and 2010, sales actually dropped from $11.14 billion to $10.99 billion. But over the last 12 months, the company is seeing a turnaround with $12.88 billion in sales.
The market enthusiasm is driven largely by the strong global secular shift towards smart phones and other internet-hungry mobile devices. As the company highlights in its latest Form 10Q, worldwide wireless subscriptions grew by approximately 3% to reach 5.6 billion. In addition, total reported worldwide device sales grew 44% in the most recent quarter.
While the company may not offer the best opportunity in the technology industry, we still think investors should pay attention to this market leader. QCOM remains a strong beneficiary to growing mobile internet device adoption.
Disk drive maker Seagate Technology Ltd (NASDAQ:STX) is struggling behind dual pressures. Not only are investors concerned about demand pressure from falling PC sales, there is also the risk that solid state drive popularity will crowd out STX's bread and butter business. These are not empty concerns; as such, the stock is priced at a trailing P/E of 10.44 and a forward P/E of 8.58. But the company's demise could be greatly exaggerated. While tablets have undergone a huge boom, they are still fundamentally different from personal computers and, as such, should not be viewed as substitutes. Also, while solid state drives are a formidable technology, they are not across the board stable enough to replace traditional hard drives at all price points. Finally, the recent industry consolidation should improve pricing flexibility.
While the company's management was already likely highly motivated to perform because of its meaningful equity stakes, the pressure may have increased following Greenlight Capital's new position in the company.