3 Stocks Set for Wild Moves on Wednesday

Foolish investors know that sometimes, earnings season can just be a whole lot of noise. At the same time, however, earnings season can be the perfect storm that sends some stocks flying sky-high or plummeting to new lows.

Below, we'll cover three stocks that are reporting earnings on Wednesday that could make huge moves. Whether those moves will be up or down is tough to tell. That's because these stocks are heavily shorted. When heavily shorted stocks come out with big news, they can either plummet -- if the news is bad for investors -- or skyrocket from the creation of a short squeeze.

I've gone looking for big movers before, and almost without exception, they have fulfilled their expectations. For instance, just last week the stocks I called out moved an average of 9.4% after earnings.

Here are Wednesday's three stocks to keep your eye on:


% Shares Short

When to Watch

Expected Revenue (millions)

Expected EPS

Fusion-io (NYSE: FIO  )


After market close



New York Community Bancorp (NYSE: NYCB  )


Before market open



E*Trade Financial (NASDAQ: ETFC  )


After market close



Sources:; E*Trade.

Because NYCB will release its information before the market opens, you can expect to see big moves by tomorrow morning. With the second two companies, however, earnings come out after the market closes, so the huge swings will likely take place in after-hours trading.

This company specializes in flash memory devices used to store and organize massive amounts of information. In other words, it serves big data. Investors in the company have endured a difficult 2013, with the stock down about 41%.

Several factors have converged to create a difficult year for shareholders. In May, the stock plunged 27% on news that the company's co-founders were leaving. In early August, the stock gave an encore performance, falling 22% on second-quarter earnings. The main culprit has been increased competition as flash storage devices essentially become commodities with falling prices.

Things look so bleak in the face of increasing competition that the best news for shareholders has come from buyout rumors. As big data's bigger players started buying up smaller flash-storage counterparts, many believed that either Seagate or EMC would be interested in adding Fusion-io's technology to its offerings.

New York Community Bancorp
I always think it's interesting when shorts bet against basic regional banks. While NYCB does have operations in areas far-flung from New York -- like Florida and Arizona -- its business is pretty simple, catering to individuals as well as small and medium-sized businesses.

Shareholders have enjoyed a fairly solid 2013 so far, with shares up just more than 20% -- about equal to the broader market. The company also offers an outsized dividend, currently yielding 6.3%.

More important to shorts are the effects of higher interest rates. NYCB specializes in mortgage loans for multifamily housing units. As interest rates have slowly climbed up -- and may continue to in the near future -- some shorts may believe that the volume of mortgages may fall and the spread may narrow.

E*Trade Financial
Beyond the cute baby commercials, E*Trade is one of the major players in online brokerages. The company's shareholders have enjoyed a remarkable run in 2013, with shares trading 94% higher year to date.

For one thing, as the stock market continues to roar forward -- it's up 156% since March of 2009 -- more retail investors are entering the market, meaning more business for E*Trade. The company has also decided to get out of the banking business -- making loans and such -- and focus solely on its core competence of online brokerage.

The greatest threats that shorts are focused on is likely losses from the discontinued loan branch of the company, as well as competition from other brokers and large banks that have deeper pockets to create an online experience equal to or greater than what E*Trade has to offer.

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Brian Stoffel

Brian Stoffel has been a Fool since 2008, and a financial journalist for the Motley Fool since 2010. He tends to follow the investment strategies of Fool-founder David Gardner, looking for the most innovative companies driving positive change for the future.

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5/23/2016 4:00 PM
EMC $27.70 Down -0.11 -0.40%
EMC Corp CAPS Rating: ****
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