3 Predictions for the New Week

This Fool sees a limb to go out on, and he's the adventurous type.

Mar 2, 2014 at 3:00PM

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

  • I predicted that ZELTIQ Aesthetics (NASDAQ:ZLTQ) would move higher on the week. The company behind the gut-thinning CoolSculpting machines spent all of 2013 boosting its guidance, and posting quarterly results seemed like a good time to keep the good news coming. It was a strong quarter, with revenue soaring 93% for the period, but unfortunately it posted a wider deficit than analysts were projecting. The stock was trading slightly lower on the news but then dropped 8% on Friday alone. I was wrong.
  • The Dow Jones Industrial Average (DJINDICES:^DJI) bounced back recently, and I figured that the index of 30 leading blue chips would outperform the tech-heavy Nasdaq Composite. The Dow climbed 1.4%, eclipsing Nasdaq's 1% uptick. I was right.
  • My final call was for SINA (NASDAQ:SINA) to beat Wall Street's income estimates in its latest quarter. The Chinese Internet pioneer made more waves with its plans to spin off its popular Weibo micro-blog than with its actual report, but it was still worth heeding. SINA closed out the quarter with an adjusted profit of $0.47 a share. Analysts had been banking on net income of $0.46 a share. I was right.

Two out of three? I can do better than that, though I have gone a solid 18 out of 21 over the past seven weeks.

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. RadioShack will post a wider loss than expected
RadioShack (NYSE:RSHCQ) was the toast of the Super Bowl with its clever self-effacing ad that poked fun at its peak of relevance in the 1980s, but a hot commercial isn't enough to revive this fading retailer.

Quarterly results come out on Tuesday, and they aren't likely to be pretty. Analysts see a 14% plunge in net sales during the seasonally potent holiday quarter, and they're looking for a loss of $0.13 a share.

RadioShack's been struggling to turn a profit lately, and it's posted a larger deficit than Wall Street's target in each of the three previous quarters. Until momentum shifts, the smart money has to say RadioShack will come up short again.

My first call is for RadioShack to post a wider quarterly loss than Wall Street's projecting this week.

2. Nasdaq will beat the Dow this week
I routinely picked the tech-heavy Nasdaq Composite to beat the Dow Jones Industrial Average in this spot, but I've been switching it out in recent weeks. I'm going to back to my original call this time around, betting on a strong week for tech now that earnings season is starting to wind down.

My second call is for the Nasdaq Composite to outperform the Dow Jones Industrial Average on the week.

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

Ambarella (NASDAQ:AMBA) is a provider of sytem-on-chip solutions for the HD camera industry. Ambarella's clients include GoPro action cameras and Dropcam security systems. A couple of months ago, it announced a deal to lend a hand with Google Helpouts.

Another thing it does is make analysts look like perpetual underachievers. If analysts say the company posted a profit of $0.19 a share in its latest quarter, I'll argue that it held up better than that. 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.

Quarter

EPS Estimate

EPS

Surprise

Q4 2012

$0.13

$0.18

39%

Q1 2013

$0.15

$0.21

40%

Q2 2013

$0.19

$0.26

37%

Q3 2013

$0.29

$0.37

28%

Source: Thomson Reuters.

Things can change, of course. Analysts see margins contracting during the current quarter, with only modest earnings growth. We've seen other chip markets become cutthroat industries, and that day may once come for Ambarella's niche.

It's still hard to argue against the trend. Everything seems to be falling into place for another market-thumping quarter on the bottom line.

One more prediction for 2014
Well, there are three predictions right there. Let's see how I fare this week. In the meantime, remember that there's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Rick Munarriz owns shares of Ambarella. The Motley Fool recommends and owns shares of Ambarella, Google, and SINA. 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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