Earnings season is a great time to watch for stocks that decline after a company reports earnings or guidance that disappoints investors. Many stocks see exaggerated drops in their share price if a company "misses" earnings expectations by even a couple of pennies. Other times the earnings meet expectations, but if the company gives guidance that looks weak, it also often results in an exaggerated sell off in the stock. The reason I look for these opportunities is because stocks that are oversold often rebound quickly, sometimes in just days and this can create quick profits for traders or solid entry points for longer term investors. With earnings season in full swing, there are stocks getting major haircuts everyday for what might be just a short term earnings miss, so opportunities abound. All of the stocks below recently reported earnings and/or guidance that caused the shares to drop substantially. These stocks could rebound in the coming days and weeks:
Amazon.com, Inc. (NASDAQ:AMZN) shares are trading at $206.78. Amazon is an Internet retailing giant and is based in Washington. The shares have traded in a range between $156.77 to $246.71 in the past 52 weeks. The 50-day moving average is $219.42 and the 200-day moving average is $197.36. Earnings estimates for AMZN are $1.95 per share in 2011, and $3.20 for 2012. This company continues to expand into areas that could lead to continued strong growth in the future, however, the stock was priced for perfection and it fell sharply from about $245 to below $200 after earnings were released this week. Big drops like this can create nice trading opportunities so it makes sense to buy dips and sell the rallies, although I would have no interest in holding this stock longer term due to excessive valuations.
Coinstar, Inc. (CSTR) is trading at $52.95. These shares have a 52 week range of $37.43 and $67.56. The 50-day moving average is $46.12 and the 200-day moving average is $47.61. Estimates for CSTR are about $3.09 per share in 2011, and $3.79 for 2012. This stock dropped significantly reported earnings and guidance did not please investors. Some of the concern seems to be that CSTR announced a price increase, just as Netflix (NASDAQ:NFLX) recently did. When Netflix raised prices, many subscribers cancelled their plans and that lowered revenues. Coinstar looks like a good stock to buy on dips and then sell on a bounce.
McDermott International (NYSE:MDR) shares are trading at $10.97. McDermott provides engineering and construction services primarily for offshore oil and gas projects. The shares have traded in a range between $9.34 to $26.14 in the past 52 weeks. The 50-day moving average is $13.25 and the 200-day moving average is $19.24. Earnings estimates for MDR are just $1.19 per share in 2011, and $1.55 for 2012, so the PE ratio is about 6.5 times forward earnings. MDR shares plunged this week after earnings were announced, and closed down about 25%. Some projects were not as profitable as expected this quarter, but the company will likely improve operations in the coming months and the stock is likely to rebound sharply in the coming days. This is the only stock here that I would buy and hold for the long term.
Digital River, Inc. (NASDAQ:DRIV) shares are trading at $23. The 50-day moving average is about $20.70 and the 200-day moving average is about $29.51. Digital River provides online e-commerce solutions. Earnings estimates for DRIV are about $1.11 per share in 2011, and $1.38 for 2012. Digital River announced earnings after the close on Thursday and the stock traded down in after-hours trading. The company missed only by a penny but issued downward guidance for Q4 which will probably lead to a lower stock price. If it drops enough, it could be a good short-term rebound candidate.
Ariba Inc. (NASDAQ:ARBA) shares are trading at $33.15. ARBA is a leading technology company that provides business solution products. The 50-day moving average is $28.54 and the 200-day moving average is $30.51. Earnings estimates for ARBA are about 80 cents per share in 2011, and 98 cents for 2012. The book value is $6.72. Ariba reported earnings on Thursday and the stock fell in after-hours trading. It looks like earnings met expectations but perhaps blow-out numbers were needed to keep investors in this high multiple stock. If the stock drops substantially in the coming days it might be a good short-term trade.
Qlik Technologies, Inc. (NASDAQ:QLIK) shares are trading at $28.87. The 50-day moving average is about $24.13 and the 200-day moving average is about $27.21. Qlik provides data analysis software solutions. Earnings estimates for QLIK are 27 cents per share in 2011, and 46 cents for 2012. Qlik announced earnings after the close on Thursday and the stock traded down in after-hours trading. The earnings looked to be slightly above (by 3 cents) expectations but that wasn't enough for some investors, as revenues were lighter than expected. If it drops enough, it could be a good short-term rebound candidate.
The data is sourced from Yahoo Finance and Stockcharts.com. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes.
Disclosure: I am long MDR.