Netflix (NFLX): I don't think this one is a surprise, given all of the negativity around the name, a lot of which has come from me. Just a few days ago, I was finally able to publish a somewhat positive article on Netflix when they sort of brought back their DVD only plan. However, just hours after my article was published, Comcast (CMCSA) announced a streaming plan to take on Netflix. Shares of Netflix dropped Tuesday and Wednesday, and at time of writing, had lost more than $15 off Tuesday's high. You could make the case that the collapse has started already.
We all know the issues with Netflix. Lack of profitability in 2012, billions in content obligations that nobody is sure they can pay, and an apparent lack of strategy from upper management. Netflix soared in early 2012 but with so many competitors expanding their reach or announcing new plans recently, it seems like Netflix is doomed in the long run. We should know Netflix's fate in the next few quarters.
Dendreon (DNDN): Of course, you probably could put any biotech on this list, as any disappointment will always sink the stock. But Dendreon is not just any biotech. It has been one of the most watched, traded, and scrutinized biotech in recent years.
So why is the company on my list? Well, everyone knows it is heavily reliant on Provenge. Dendreon reports earnings next week, and has 3 more reports coming during 2012. The company has widely missed earnings expectations in past quarters, and I just don't see it meeting expectations 4 times out of 4. Sales, earnings, or Provenge will disappoint at some point, and I think that's a given. Dendreon will fall as a result. We've seen so many rises and falls in Dendreon over the past years that the average investor needs to stay away, but more sophisticated investors probably will want to try to take advantage of a large price swing in the name. Dendreon has produced some lottery ticket like rewards in the past when things are good, but I'm sure you can find plenty of investors who can tell you they didn't like waking up and seeing the name down 20%, 30%, or 50% as well.
Research in Motion (RIMM): Research in Motion warned on sales, earnings, or the Playbook at least five times last year, and I expect more warnings to come. The company is selling a third of the phones that Apple (AAPL) is, and at like half of the price.
The company just launched the new version of the Playbook, and the stock has gone down. When RIMM reports earnings next month, it is going to be ugly. Initial expectations were for $5.25 to $6 for the fiscal year, and they will be lucky if they do $4.25. In fact, going forward, they might not even do $3 in the next fiscal year (ending Feb. 2013). I'm not looking for a home run with the 2nd Playbook, but they need at least a double and maybe some help. Apple and Amazon (AMZN) can kill their tablet sales right now. Research in Motion is heavily reliant on its phone sales, and with more companies switching to iPhones now, future sales could go lower and lower.
Ford (F): I don't think the automaker's are doing as well right now as some would be led to believe, and I think that will cause some pain this year. Ford missed by a nickel in the fourth quarter, and earnings per share are expected to continue declining in 2012 despite rising revenues. Costs are just too high right now.
A few months ago, analysts were expecting $1.75, even $1.80 in earnings from Ford this year. A month ago it was down to $1.56, and now the estimate stands at $1.47. Will higher gas prices affect sales early on in the year? How about international sales? Will they do well? To me, there are just too many questions now, and with profitability coming down, I don't see these names going up. Ford's stock has mostly shaken off the latest quarter's miss, but investors can't bid these names up too high, or they will come crashing down.
Groupon (GRPN): Groupon is an interesting case. It ran up thanks to the Facebook IPO hype but came crashing down after earnings. The stock currently trades at about 67 times expected 2012 earnings, but that is only if the company can be profitable, and last quarter, it failed in that respect.
Groupon posted a two cent loss while analysts were expecting a three cent gain. I think this name could rally again with the Facebook IPO, but once the hype settles down, the name could fall. This company needs to establish profitability. Current estimates call for the name to have earnings of a dime in the first half this year and 19 cents a share in the 2nd half. Given the recent miss, they could struggle to hit those marks, and that will take a chunk out of the stock. Once the Facebook IPO is done with, these names will go back to fundamentals, and Groupon's profitability is going to determine how this stock does.