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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 Apple (AAPL), IBM (IBM), Intuitive Surgical (ISRG), Google (GOOG), Cree (CREE), Netflix (NFLX), F5 Networks (FFIV), Check Point Software (CHKP), McDonald's (MCD), Starbuck's (SBUX), and Microsoft (MSFT).

Here is just a tiny sample of what BullMarket.com wrote about Netflix: Netflix has beaten analyst EPS estimates each quarter over the past two years. Over that stretch, the stock has risen the next session two of eight quarters. Seasonally, the stock has risen each of the last four years.

Last quarter,Netflix posted Q3 net income of $7.7 million, or 13 cents per share, which was down from $62.6 million, or $1.16 per share, a year earlier. Revenue rose 10% to $905.1 million.

Analysts had expected a profit of 5 cents per share on revenue of $905.0 million.

Breaking down the segments, the domestic streaming business generated $556.0 million in sales and contributed $90.9 million in segment profit, for a margin of 16.4%. That was up from $532.7 million in sales and $83.2 million in contribution to profit in Q2 at a margin of 15.6%.

The company added 1.16 million net domestic streaming subscribers in the quarter, upping its total to 25.1 million total subs and 23.8 million paid subs. That missed the 1.42 million consensus.

The domestic DVD business generated $271.3 million in sales and $130.6 million in profit, down from $291.5 million in sales and $133.8 million in profit in Q2. Margin improved to 48.2% from 46.0% last quarter.

Domestic DVD subs fell by -630,000 to 8.61 million total and 8.47 million paid subscribers.

International streaming generated $77.7 million in sales, up from $65.0 million sequentially, but the segment loss widened to -$92.4 million from -$89.4 million in Q2.

International streaming subscribers rose by 690,000 to 4.31 million total and 3.69 million paid subscribers. ...

Outside of earnings, Netflix doesn't have a particularly wide moat around its business. The content providers certainly have no particular reason to show fidelity to Netflix and it faces a lot of potential competition from deep-pocketed players like Amazon.com, Apple, and Google, along with the cable and satellite providers. Content costs have also been on the rise, and may be its biggest challenge.

What Netflix does have going for it is that it is a recognizable brand name, which counts for something, and it has the potential to grow overseas. In addition, while the potential competition is fierce, thus far these companies haven't gone full force to try to develop a rival service that competes head to head against Netflix, instead tippy-toeing around it with alternatives. ...
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 Q4 so far were:

  • to be bullish on eBay (EBAY) ahead of earnings.
  • to be bullish on Goldman Sachs (GS) ahead of earnings.
  • to be bearish on Intel (INTC) 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 104.9% from 2009-2012 versus a 57.9% return for the S&P, a 47.0% 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.)