3 Predictions for Next Week

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I went out on a limb last week, and now it's time to see how that decision played out.

  • I predicted that Spirit Airlines (Nasdaq: SAVE  ) would miss Wall Street's quarterly profit target in its latest report. I thought its cheap fares against the backdrop of rising jet fuel prices was a flammable situation. In the end, Spirit Airlines posted an adjusted profit of $0.35 a share. That's exactly what Wall Street was expecting. So close. I was wrong.
  • I predicted that the tech-heavy Nasdaq would outperform the Dow Jones Industrial Average. (INDEX: ^DJI  ) . The market has been volatile, but it was essentially flat during this three-day trading week. The tech-heavy Nasdaq closed 0.2% lower. The Dow, on the other hand, shed just 0.1% of its value for the week. I was wrong.
  • My final call was for Ellie Mae (NYSE: ELLI  ) to beat Wall Street's profit target. The mortgage origination services provider has been keeping ahead of the prognosticators during every quarter over the past year. It seemed like a smart bet this time around, too, even though Wall Street was already expecting earnings to more than double. Good call. Ellie Mae's adjusted income roughly quadrupled to $0.35 a share, well ahead of the $0.20 analysts were expecting. I was right.

One out of three? I can do better than that!

Let me once again 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. J.C. Penney will post a larger deficit than Wall Street is expecting
J.C. Penney (NYSE: JCP  ) is a bit of a mess these days. Comps at the department-store chain have been disastrous this year as its new CEO tries to reposition the meandering retailer. Is J.C. Penney making some progress with the stores that it has upgraded to include several "store within a store" sections themed to popular brands? Yes. However, the rest of the store is still in shambles. Why do you think J.C. Penney is bringing back those free haircuts for kids on Sundays this month?

If Ron Johnson can turn J.C. Penney around, it won't be now. The company has posted larger deficits than Wall Street was forecasting in its two most recent quarters. Those same pros see a quarterly loss of $0.05 when it reports on Wednesday. Why get in the way of pessimistic trend?

My first prediction is for J.C. Penney to lose more than the $0.05-per-share deficit that Wall Street is targeting.

2. The Nasdaq Composite will beat the Dow this week
Betting on tech over stodgy blue chips was a steady winning bet for me earlier this year. This has been a losing bet lately, but I still think technology is the best sector to be invested in these days.

I'm going to stick with this pick. Most of the names in the composite are just too cheap at this point, and they'll be reporting quarterly results in the coming days. The market is ripe for the tech-stacked secondary stocks to continue to outpace the 30 megacaps that make up the Dow Jones Industrial Average as we kick off the fourth quarter.

3.SodaStream will beat Wall Street's earnings estimates
Some stocks are just flat-out better than others.

SodaStream (Nasdaq: SODA  ) is an Israeli company that's been taking the world by storm with its namesake machine that turns still water into sparkling fizz that can be flavored into soda. It's a simple product, but SodaStream has been able to reach critical mass through retail distribution and growing adoption rates. In Sweden, for example, more than a quarter of the homes have a SodaStream system.

Another thing SodaStream does is make analysts look like perpetual underachievers. If analysts say the company earned $0.72 a share in its latest quarter, I'll whip out a "greater than" sign. History's on my side!

One of my best tricks to beating the market is finding stocks that perpetually land ahead of the prognosticators. Let's go over the past year of earnings reports.


EPS Estimate



Q3 2011




Q4 2011




Q1 2012




Q2 2012




Source: Thomson Reuters.

Things can change, of course. Consumers can turn fickle. Health concerns against soda -- remember New York City's ban on large cups in some venues -- can also work against the company. There is also the possibility that one day a legitimate rival can step up.

None of this appears to be materializing now, though. Everything seems to be falling into place for another strong quarter on the bottom line.

Three for the road
Well, there are three predictions right there. Let's see how I fare this week.

SodaStream's carbonation technology sounds simple, right? Well, this razor-and-blade company offers an intriguing opportunity for growth that may be harder to duplicate than you might think. Our premium report on SodaStream explains the opportunities as well as the risks in the company. The report comes with a year's worth of updates, so just click here to get started.

Longtime Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool owns shares of SodaStream. Motley Fool newsletter services recommend Ellie Mae and SodaStream. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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  • Report this Comment On November 05, 2012, at 1:09 AM, MinWageMaxGains wrote:

    "One out of three? I can do better than that!" That's a convenient mantra for your weekly recap. You can just cut-and-paste it following your consistently faulty speculations.

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Related Tickers

10/21/2016 4:47 PM
^DJI $18145.71 Down -16.64 -0.09%
JCP $8.84 Up +0.18 +2.08%
J.C. Penney CAPS Rating: *
SODA $24.04 Up +0.09 +0.38%
SodaStream CAPS Rating: **
ELLI $101.31 Down -0.65 -0.64%
Ellie Mae CAPS Rating: *****
SAVE $47.51 Up +0.01 +0.02%
Spirit Airlines CAPS Rating: ****