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Which Stocks Look Ready to Pop and Drop with Earnings This Week?

Stocks tend to be most volatile around earnings season, when a good or bad report can make or break it. However, a good or even great earnings report doesn't necessarily translate into a huge pop for a stock.

During earnings season, BullMarket.com publishes a comprehensive 25- to 40-page Earnings Preview report for the week ahead each Friday.

Over the past year, BullMarket.com used the data it has collected to correctly predict investor reactions for approximately two-third of the stocks it's previewed.

In its latest earnings preview, BullMarket.com looks at several popular stocks, including Whole Foods (WFM), STEC (STEC), CVS Caremark (CVS), Sodastream (SODA), J.C. Penney (JCP), Qualcomm (QCOM), NVIDIA (NVDA), Nordstrom (JWN), and Groupon (GRPN).

Here is just a tiny sample of what BullMarket.com wrote about Qualcomm: Qualcomm has beaten analyst EPS estimates seven of eight quarters over the past two years, missing the consensus once. During that span, the stock has risen the next session six of eight quarters. Seasonally, the stock has risen each of the past four years.

Last quarter, Qualcomm posted a profit of $1.207 billion, or 69 cents per share, for its second quarter ended June 24th, compared with a profit of $1.035 billion, or 61 cents per share, in the year-ago quarter. Excluding certain items, Qualcomm earnings per share would have been 85 cents compared with Wall Street expectations of 86 cents.

Revenue rose to $4.63 billion from $3.62 billion, compared with analyst expectations of $4.677 billion.

Looking at the segments, the chip segment (QCT) reported a 31% year-over-year increase in revenue to $2.87 billion. Sales were down -6% sequentially. The unit reported $472 million in pre-tax segment income, up 10% from last year but down -21% sequentially.

The licensing segment (QTL) reported $1.59 billion in revenue, up 27% year over year but down -8% sequentially. Pre-tax segment income of $1.41 billion grew by 29% year over year but was down by -9% sequentially. ...

Outside of earnings, Qualcomm is the dominant player in the high-end smartphone market with its Snapdragon chip, where demand has been outstripping supply. However, Broadcom (BRCM) and MediaTek have been taking share in the lower-end Android market that is particularly popular in developing nations. Qualcomm is looking to introduce two new chips aimed at this segment next year to try to regain market share.

More interestingly, though, the company is designing a new chip that will support 3G networks as well as China Mobile's (CHL) proprietary TD-SCDMA network. China Mobile has the largest subscriber base in the world, but its 3G efforts have been hampered by its proprietary network and handset makers having to make special solutions to support it. Qualcomm's new chip would eliminate that problem and could be a strong growth driver next year.

While competition has been becoming fiercer in the low and medium end of the smartphone market, it should also be noted that Qualcomm's licensing business still benefits from the move to 3G and 4G networks and the proliferation of devices that support these standards. And the licensing business still generates about 75% of the company's revenue and is very high margin. ...
The full BullMarket.com earnings analysis includes a look at historical earnings data and EPS trends for the companies above and more; examines past investor reactions to earnings in various contexts; gives options activity analysis; reviews previous-quarter earnings; and gives an opinion on both what earnings will look like and how investors will react based on the aforementioned data points.

Just a few of the correct calls BullMarket.com made for Q3 were:

  • to be bullish on Priceline.com (PCLN) ahead of earnings.
  • to be bullish on Starbucks (SBUX) ahead of earnings.
  • to be bearish on First Solar (FSLR) ahead of earnings.
  • A daily investment service that is committed to creating long-term wealth for its members, BullMarket.com's Recommended List of stocks is up 33.3% from 2008-2011 versus a -14.4% return for the S&P, a 47.7% outperformance, topping the benchmark each year since the start of the Great Recession. Subscribers receive actionable market commentary, access to 40+ stock ideas on the Recommended List, and real-time trade alerts. Plus, sign up for a free trial today to view Bull Market's in-depth Special Reports - including its annual High Yield and MLP reports - and its timely Earnings Previews, which are published every Friday during the heart of earnings season. Get a Risk-Free Trial to Bull Market Today! (Please note returns are unaudited.)