On Monday there was significant movement in stocks following earnings. Some were good and others were bad, but with significant movement always come several questions such as what to do next? Below, I look at five of the biggest movers and givesmy opinions on how to play each stock's performance.
Priceline (PCLN) is perhaps the most high profile of the stocks on this list. The company announced Q4 earnings and crushed expectations with revenue of $991 million, a 35% gain year-over-year, and an EPS of $5.37, a 58% gain over the year prior. The stock is currently trading with a 7% gain in pre-market and is expected to trade at this level throughout Tuesday's trading day.
As you can see, by looking at the one year chart of PCLN, the stock recently broke out of its range after surpassing resistance at $550. The stock is now trading at $630 in premarket which is an entirely new level for this stock. I was actually quite bearish on the outlook for this company due to disappointing earnings from similar companies such as Travelzoo (TZOO) and Expedia (EXPE) but the company proved that it stands alone in this particular industry. The stock is trading with a P/E over 30 which is fairly high for a $30 billion company. I expect for PCLN to test gains of 8% on Tuesday but then retrace and close with gains near 4%. There will be a large amount of profit taking and I expect the stock to trade somewhat volatile. Over the next few months I wouldn't be surprised to see it surpass $660 but I doubt it trades much higher. The stock has been on a run, therefore if I owned shares in this company I would take profits and wait for a pullback before buying back, and then look for the stock to test prices of $660 over the next few months.
I wrote an article about Zagg (ZAGG) on Sunday and predicted that it would trade higher as a result of record sales from the iPhone mania. Luckily I was correct and the company posted Q4 revenue of $67.5 million a 131% year-over-year gain and beat earnings expectations by $0.07 with $0.27. The stock finished after hours trading with a gain of 8.55% with nearly 300,000 shares traded and is now trading higher by 10.5% in premarket trading.
I really like the chart that is being shown for ZAGG over the last year. The stock has retraced from its highs after posting recent quarters that reflected significantly falling margins. However, the stock has traded higher in 2012, but still has a substantial amount of room to trade higher. I expect ZAGG to trade higher throughout the trading day on Tuesday but expect the large gains to come over the next two months. There is a significant amount of controversy surrounding this company and questions regarding the sustainability of its business. I think ZAGG answered a lot of questions on Monday with a blowout quarter and I expect the stock to test 52 week highs in the immediate future as a whole new level of optimism should arise from its Q4 earnings report.
Pacific Ethanol (PEIX) is a company in which I have been very bullish for quite some time. The company's sales in gallons sold have been at all-time highs, the company is expanding its operations, and bouncing off 5 year lows. The company announced earnings and its stock is now trading lower by 20%. It posted an increase in net sales of 80% year-over-year with $241.8 million but missed bottom line expectations by $0.06.
Above shows the one year chart for Pacific Ethanol, and shows a one year loss, but also a gain since November of 2011. But what the chart doesn't show is that PEIX has lost over 95% of its value over the last 5 years. However, 2011 was a breakout year for the company, as it now trades with a profit. I think the company's earnings report was quite encouraging, but the stock had popped 50% in the two days prior to earnings in anticipation of strong results. Therefore, strong results were already priced into the stock. As an investor, I think it would be wise to let the dust settle and allow the momentum investors sell shares. I then think PEIX would make a great investment, maybe on Wednesday, because one thing is for sure, this company is undervalued and is trading with significant fundamental improvements.
Jazz Pharmaceuticals (JAZZ) is trading higher by 3% in premarket trading on Tuesday after exceeding analysts expectations. The company posted Q4 revenue of $83.5 million and net income of $37.5 million, increasing both top and bottom line earnings by more than 50%.
Jazz is a stock that is simply unable to return a one-day gain of 30% regardless of earnings. Investors had been expecting strong results, which is why the stock traded higher by 8% over the last 5 days. The relatively small gains don't necessarily mean it didn't exceed expectations by a large margin, it just means that volume is somewhat low. I expect JAZZ to trade higher throughout the day and wouldn't be surprised if it posted a one day gain of 8%. However, the stock trades at just 11.5x future earnings and is one of the faster growing biotech companies in the market, therefore I don't think the best gains are immediate but rather as a long-term investment. Overall, if I can buy this stock with a 2% gain following earnings then I will, because it will almost definitely trade higher throughout the day, and most likely into the next week.
Cooper Tire & Rubber Company (CTB) traded higher by nearly 14% on Monday after the company exceeded earnings expectations and reached a labor pact. The company announced Q4 sales of over $1 billion or a 14% gain year-over-year and net income from continued operations of $209 million.
I must say, I have never been too bullish on CBT, in fact, I like Goodyear Tire (GT) much better. But, one fact that can't be denied is that CBT is trading higher and its earnings were very impressive. The company is taking advantage of a strong auto industry, more so than GT, as a result I expect the stock to continue trading higher. This is a stock that trades with low volume but is 140% more volatile than the market. And since the stock just jumped 14% I believe it may slide on Tuesday, but I expect CBT to trade significantly higher over the next couple months and wouldn't be surprised to see the stock reach $25 in the near future.