By Andrew Lehto
Earnings season is well under way. A positive earnings report can often be the catalyst that a stock needs to begin a strong uptrend. Here are five stocks from the emerging technology sector that may get the spark they need to generate positive returns for equity investors through 2011 and into 2012.
Renren Inc. (NYSE:RENN) Renren shares have trended down over 65% in price since it traded over $18 per share in May after its initial public offering. Renren is set to release third quarter results on November 10th. Renren reported strong results for the second quarter with total revenues of $30.4 million - driven by a 93% increase in online advertising revenue for the period - up 53.2% from the corresponding period in 2010. Renren also reported net income of $0.8 million for the second quarter versus a net loss of $25.5 million a year earlier. The company expects third quarter revenue to increase to $33.5-35.5 million. On September 29th, Renren announced a share buyback program of up to $150 million. Renren is not obligated to repurchase shares, but this is an indication that management may feel that the company is undervalued at the current stock price. Renren’s primary competition is Baidu, Inc. (NASDAQ:BIDU). However, Renren has differentiated itself from competitors by focusing on the social media aspect of its business, often being referred to as “The Facebook of China.” The growing Chinese internet market offers some great upside potential for Renren based on the popularity of social networking in more mature markets.
Baidu, Inc. (BIDU) On October 27th, Baidu reported very strong financial results for the third quarter of 2011. Revenue was $654.7 million, an 85.1% increase over third quarter 2010. Net income increased 79.8% over third quarter 2010 to $295 million. Earnings per share were $0.84 for the quarter, beating analyst estimates of $0.83. Baidu’s operating margin of 52.5% is very attractive compared to the average industry operating margin of 3.49%. Baidu trades at a price to earnings ratio of 54.35% (trailing 12 months) compared to 20.15% for the industry. Baidu’s primary competitors in the Chinese internet market are Sina Corporation (NASDAQ:SINA) and Sohu.com Inc (NASDAQ:SOHU). Baidu dwarfs these competitors in market capitalization, market share, and most key financials. Baidu’s return on equity over the last 12 months has been 53.93%, compared to 23.32% and -3.30% for Sohu and Sina, respectively. Baidu has established a large presence in the growing Chinese internet market, and will be a solid investment if it continues to show revenue and income growth similar to the last quarter.
Sirius XM Radio Inc. (NASDAQ:SIRI) Sirius reported very strong third quarter results on November 1st. Revenue was $764.8 million for the quarter, up 6% over third quarter 2010. Net income increased 54% from third quarter 2010 to $104 million. Earnings per share of $0.02 beat analyst estimates of $0.01 for the quarter. Sirius XM reported an increase of 334,000 subscribers for the quarter, bringing its total number of subscribers over 21.3 million, an increase of 7.5% since third quarter of 2010. Primary competitors for Sirius XM include Cumulus Media Inc. (NASDAQ:CMLS) and privately held Clear Channel Communications. While Sirius XM increased revenues in the third quarter, Cumulus Media reported a revenue decrease of 0.80%. Sirius XM is a good stock to keep your eye on as the company continues to increase earnings and acquire new subscribers.
Priceline.com Inc. (NASDAQ:PCLN) Since March, Priceline.com has traded in the range of $450-550 per share. Priceline.com will report third quarter 2011 earnings on November 7th. The average analyst quarterly net income estimate is $9.02 per share, but Priceline.com has reported higher earnings than consensus estimates for the last 4 quarters. In September, Priceline.com launched “Tonight-only deals” for iPhone and iPod users, allowing deep discounts on last minute travel arrangements. While this program will not be reflected in the upcoming earnings report, it shows that Priceline.com is actively creating opportunities to differentiate itself and create new revenue streams. Competitors for Priceline.com include Expedia Inc. (NASDAQ:EXPE) and Orbitz Worldwide, Inc. (NYSE:OWW). Both Expedia and Orbitz recently reported third quarter results that exceeded consensus estimates, with year-over-year revenue increases of 15% and 4%, respectively. Gross bookings were up 11% and 1% for Expedia and Orbitz as well. With the winter and holiday travel season approaching, Priceline.com shares could be set to make a solid move toward the resistance level at $550 if the third quarter earnings release next Monday exceeds consensus estimates as it has the past four quarters.
Ancestry.com, Inc. (NASDAQ:ACOM) Despite a strong third quarter earnings release on October 26th of $0.40 per share vs. $0.24 per share for the same period 2010, and the announcement of a share repurchase program up to $50 million through September 2012, Ancestry.com is trading at the lower end of its 52 week range. Along with the solid financial results, Ancestry.com reported a 24% increase in total subscribers since third quarter 2010. Ancestry.com also recently reported adding 53 new historical vital record collections, over 50 million total new records, to what is already the largest searchable vital record database. The strongest competitors for Ancestry.com in the online genealogy arena are privately held companies Dalesman Publishing Company Limited and SeniorNet. Both competitors provide genealogy records, but their primary focus is on other activities. Ancestry.com has carved out a good niche for itself as the online vital record and genealogy leader. Watch for the share price of Ancestry.com to trend upward as it continues to increase subscribers and repurchase shares while the share price is low.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.