This is going to be crazy week as we dive deep into earnings season. Hundreds of companies will be stepping up with their quarterly financials, and in most cases providing a little visibility about the future.
Let me whip out my trusty, dusty, and occasionally accurate crystal ball to make three calls that may play out over the next few trading days.
1. Netflix shares will climb tomorrow
There's little reason to expect good news when Netflix (Nasdaq: NFLX ) reports later tonight. The video rental giant hosed down its subscriber count guidance in mid-September, and that was before the Qwikster fiasco shooed away those straddling the fence after the summertime rate hike on couch potatoes with dual Netflix plans.
No one will be shocked if Netflix reports closing out the third quarter with fewer than 24 million subscribers, and it also wouldn't be a surprise if Netflix guides its membership projection lower still for the current quarter.
However, there are a few things working in Netflix's favor.
- The stock has already shed nearly two-thirds of its value since its summertime peak, so anything short of Armageddon -- starring Bruce Willis -- will come as a welcome relief.
- The rate hike hitting half of its roughly 24 million accounts kicked in last month. In other words, the loyalists sticking around will be even more lucrative for Netflix. Subscriber count may be projected lower, but any revenue, average revenue per user, and earnings guidance should be refreshingly higher.
- Cynics have largely forgotten that Netflix now has more than 20 million -- 21.8 million as of last month's iffy guidance update -- paying to stream. This will make it easier to overcome any digital shortcomings such as offering premium new releases or justifying costly content licensing deals.
I've been wrong about Netflix's near-term moves before. Short-term price actions are more foolish than Foolish. However, Netflix's best shot to bounce back -- extending beyond tomorrow's trading day -- begins with tonight's reveal.
2. iRobot will beat Wall Street's profit estimates
Analysts see iRobot (Nasdaq: IRBT ) -- the company behind Roomba dirt-sucking automatons for the home and PackBot military robotics for spotting roadside bombs -- earning $0.26 a share when it reports third-quarter results tomorrow.
Bet on the over. It's not just a hunch. iRobot has easily bested Wall Street's targets over the past two years.
|
Quarter
|
EPS Est.
|
EPS
|
Surprise
|
| Q2 2011 |
$0.21 |
$0.29 |
38% |
| Q1 2011 |
$0.23 |
$0.27 |
17% |
| Q4 2010 |
$0.14 |
$0.26 |
86% |
| Q3 2010 |
$0.07 |
$0.27 |
286% |
| Q2 2010 |
$0.08 |
$0.20 |
150% |
| Q1 2010 |
$0.04 |
$0.24 |
500% |
| Q4 2009 |
$0.16 |
$0.20 |
25% |
| Q3 2009 |
$0.02 |
$0.10 |
400% |
Source: Thomson Reuters.
All impressive streaks come to an end. We saw Apple (Nasdaq: AAPL ) finally prove mortal this month after consistently trouncing estimates for nine years. There comes a time when the pros tracking iRobot will catch up to its fundamentals. It's also hard to get excited about a company that relies on government contracts in times of spending cuts and consumers buying costly electronic appliances in an iffy economy. Then again, isn't that the same climate that we've had over the past two years?
Until iRobot follows Apple into mortality, bet on it landing ahead of the prognosticators.
3. Akamai shares will climb on Thursday
If the trend is your friend with iRobot, the gut instinct would be to steer clear of Akamai (Nasdaq: AKAM ) after it reports its quarterly results on Wednesday after the close. The stock shed nearly 20% of its value the day after coming up short in its most recent quarter. It has shed 15% the day after each of the two quarters before that.
I must really be going out on a limb if I'm counting the content-delivery network leader to finally bounce back, but I have my reasons.
Just like Netflix, most of the negatives are already out there. We already know that Akamai's business -- serving up fast and secure website pages and media files -- has become a cutthroat niche. Smaller rivals Limelight Networks (Nasdaq: LLNW ) and Level 3 (NYSE: LVLT ) are offering ridiculous rates to win new accounts. The key difference here is that Akamai's model and its economy of scale make it the only one of the three that is currently profitable. This is important because it means that the price war has to eventually end or it continues until Akamai is the last content-delivery network left standing.
Akamai has shed roughly half of its value this year. Enough! This remains a specialty with growing demand, and the cheaper Akamai gets the louder that buyout rumors will get. Akamai won't necessarily have good news to offer on Wednesday night, but I think battered investors are ready to exhale and push the stock higher anyway.
If you want to see how these market calls pan out, consider adding Netflix, iRobot, and Akamai Technologies to My Watchlist to track upcoming news.
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